box 1434, folder 4: open market investment committee (sep ... · declassified authority &q /z 7...

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Form P .

/

DECLASSIFIED Authority / 2 ,9 5 7 *

XV

R. 567

EN D S H E E T

K IN D OF M A T E R IA L OR NUMBER 3 3 3 * ‘- f c - l

n a m e o r s u b j e c t Open Market Investment CommitteeOpen Market Operations

DATES (inclusive) 1923

PAR T NUMBER Part 1

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

declassifiedAuthority & Q / Z 7 5 ~ f


~ . 3 3 3 4F e d e r a l R e s e r v e B a n ko f S a n Fr a n c i s c o

December 27, 1923

Federal Reserve Board,Washington, D. C.

Dear Sirs: Attention: Mr. Walter L. Eddy.

^ I beg to acknowledge receipt of your confidently

letter of December Sdji^dvising me of the resolution adopted

by the Federal Reserve Board on December 3, 1923.

F^ertl *tdt&ry9.


f6d / Declassified Moldings of the National Archives

declassifiedAuthority % £ l£ Z 3 5 J

C0

PP *Y

CONFIDENTIAL December 24, 1923

My dear GovernorIn accordance with my letter of December 12, 1923' * ' ' 1 ’ -

acquired for the System at the discretion of the Open Market Investment Committee, and

have formulated a plan which will be simple and easy of operation and at the same time

will provide for an equitable distribution of the investments and of the subsequent profits or losses, if any, resulting from these transactions.

The proposed plan, which has the approval of the Committee, is as follows:1. As securities are purchased the New York Bank is to charge

the cost of all purchases made to a special account to be carried on its books under the title "Special Investment U* S. Securities,"

2* The par amount of all purchases made will be prorated to each reserve bank on the percentage basis already set forth in my letter of December 12, 1923, the New York bank crediting the total amount allotted to the other eleven banks to an account on its books entitled "Participation of Other Federal Reserve Banks in Special Investment U. S. Securities," at the same time advising each other reserve bank of the amount of its participation.

3. Upon receipt of these telegrams each other reserve bank will credit New York through the gold settlement fund, debiting an account on its books entitled "Participation in Special Investment U, S* Securities," the total of the participation by each bank to be carried on its balance sheet fonn34 against this caption*

4. The figures reported on the weekly press statement will, of course, be against the usual captions "U* S. Certificates of Indebtedness" or "U. S. Bonds and Notes,** as the case may be, and each bank will be advised each Wednesday night by the New York Bank as to the division of its quota between these two accounts*

5. The New York Bank will handle all accruals of earnings by first accruing the earnings on the entire fund tp a special accountto be styled "Interest Earned on Special Investment U. S. Securities," after which it will each day distribute the accrual to each bank in the same proportion as the investment, crediting each bank daily with its proportion through the gold settlement fund, and debiting an account to be entitled "Participatioh of Other Federal Reserve Banks in nterest on Special Investment U* S. Securities*"

cedure to be followed in the handling of short-term investments in Government securities

6# Each other reserve bank will credit its share of the earnings to its regular account "Interest Earned on U. S. Securities" or if it prefers, to an account "Interest Earned on Special Investment U. S. Securities."Digitized for FRASER

http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

DECLASSIFIEDAuthority &Q / 2 7 S T

* * 2 -

7. As sales are made the operation will, of course, be reversed, New York crediting each bank with its proportion through the gold settlement fund, and each other reserve bank crediting its account “Special Investment U. S. Securities” upon receipt of the advice of sale,

8. In case of profits or losses resulting from sales, the distribution will be made in the same way, each bank being furnished with full information,

\Under this plan the New York Bank will carry on its books the premium and discount 7

accounts, if any, and also the “Accrued Interest Not Collected,H The other eleven banks

will have only the earning asset account representing the par amount of their participation in the total purchases and the earnings actually accrued. This will materially simplify

the handling of these transactions so far as the accrual of earnings and the advising daily of entries over the wire is concerned.

In the event of changes in the ratios of distribution to the several reserve banks, the total account will be adjusted to the new percentages with appropriate wire advice to

each bank concerning entries to be made or, when the adjustments are small, it will probably be absorbed in the first transaction thereafter, whether purchase or sale.

As and when other reserve banks are directed to make purchases for this account,

such bank will receive payment in full from the New York bank, following which the New York Bank will make distribution in the same manner as though purchase had been made bji it in

the first instance. The securities purchased for this account will be retained by the New York Bank and will be lodged by it in a “Special Account” to be held for the System separate and apart from all other securities held by it*

The Committee has already invested |3,500,000 in March 1924 certificates for this account and as soon as all of the banks have been heard from, this purchase with any others

made in the meantime will be prorated in accordance with the foregoing.

Will you please let me know promptly if there is anything about this procedure

that is not clear to you, or with which you are not entirely in accord*Very truly yours,

Benj. StrongChairman, Open Market Investment Committee for the Federal Reserve System

N°te♦ For your information, we have received advices from the governors of all Federal reserve banks stating that the plan outlined in my previous letter has been presented to their respective boards and that it has their approval.Digitized for FRASER



DECLASSIFIED Authority Z {) / 2 75~T

• i ^I ' - o r m N o . 1 3 J.. / , , 4 m. ^

Office CorrespT o _ _ ¥ * • H a n l i n . . . . . . . . . . . . . .. S ubjec

F rom

2 3 ?■b„v„ jeiibor 17, iSiiS.

a . - /

it the ©eeting this ssowitng, jnjw were appointed a oocnnlttee of mwf for the Board* to ooopcreto with &m ® m or strong* anel tr# jay in the preparat Ion of » to m of statement on the sabjeot of egwm martset operations for publication in the Janttary, 1924 ismse o? €he



DECLASSIFIEDAuthority &Q / Z

t

Corresp FEDERAL RESERVE + • £ * BOARD

Subject:

-Stantfet-

! y iZ Am&cned herewith is a copy for the Board minutes of the statement........ ... . jj||---

feet nolicy which was adopted by the Board at its meeting yesterday,

/ i



DECLASSIFIED Authority &Q / 2J?5^&

. At t&o foioiral rooanro taxne* discounts

Inoroaaod rmpioly Aurinc the year, talt thoro «fti * o©rr*»pondln« ftaollne Is

opOM»rt»t hoiairc*t with the raoolt that to ta l earning a m U regains*

ralatlvoly • table* I® fac t, a* •r.owt. bj tha sfoa)rt» roXatlva s ta b ility in tb* to ta l

Tolur», v ith mmmm tn th* eaj>osi%ior, baa %«o& the rrinaipal ofaaraotarUtio of

I H t f t l rasorv* feasfc aaaota during %h* past two yoars* tktaa two y n r i

tho ooontry sUwlil.v frocn v l#OOOt OGOt OOO to âf£00#000#000 of *ooo*r« tank

cred it. In vl«w or th is rela tively oowfcant decani, th© yaars IfM and iffi#

afford as opportunity of ofca*rrtns tJb* offoot of otmngm la th* volwn* of o$on*

rarkst holuinpe ttp on Uwj volant of ntnber feacJt 6isaoo&t*« mis oharîx*; r*»

latienshlp was oomoKto* on in tb« i$ay asul JTuiy iooaoft of tfeo SuU otir, an*

i t boat oooâ a t tho ales* of t o I'/osr* to m m a woro oons&o to

w iaw at t o rela tion botooon t o two o&o&Mtto of JMmmI rooasvo e ro tit

policy — ro4i#oouat operations and 0|^Qt«narlc®t opera, t ion* *

lia th© v&riy part of 19-2 tlm- roa^rvo tenleo jswe abased a oonoider&blo ■

t**ao of short tom ôvonmoot sooarltios in tho opon-toartaot* ^partly for the jmr-YuUJ&*\ w uLutA^LXbjU Aj., I d L .U ^ ^

poo® of obtaining m n »i&go» 'and in 192Z th^y 8fiUb t=£aep**?WPt^0f thooo aocur-

i t 100* m tin# abooiioo of etetio lm the a^rog&to <ioeso»£ for fooorro tank orodit,

th* ixioreaooo In o;pm-«o*fcot jmrehaaoo taring 19££ wor@ offoot fcgr o oorroBpoHdisjg

doolino In th« voli*r*- of uisooimts* and In lt$& tho r«*kioUoa In oootiritios mm

aocwânlod lap a substacti&lly ©%«l?a*oat iooroaso in 6isoetxftts«

In l$Z& when t&o reeurve banks feooght ooooirltloo tho funds whl^h thoy

paid to th@ oollors fount tholr wa r Into moRfcor hoatim ant p^ralttoA tbos« badca

to r®pu.>" ax3 Ofâl amount of th^ tr .rotiooomtst aggrogato n KMtat of ro»#rv©



DECLASSIFIEDAuthority & £U 2?f5J

teilc ontUI in aaa wm not laaraaoa* or «roa smtariaXly aha»#o4j a oort&in maomt of tholr v»r« moroiy tlma convertor into "ooourltUo**Bat tli# offoot on tfc* ®*uteor banfco* partleuIarXy in tJm iarfO ooatara, wa» to

*&4 to tiMlr IqfcafcXo fatfa or to enable thorn toj bolr iB*obto&noa« at thO fOOOfTO feOJBfcO# Utei.or OQOh OQKHlttiotUl aS*0 XllCOXy to lOttt 1KUPO fttlXjfto tboir oaatoeort ana othoro*

J J J L ^

lD 1S23‘ * tte ou“r b“ a* •*-“ tho ***• « “ « • ■ * * $ * withdrew trm tfco âxltot m oûlwalont ca&oant of M « * ^©llewicy the wi%h» drawal, tfco wftrtDBt terroftd mtetttiliftUi tho «it« meant & m tbo b&efeo$ an& tho fcastfca* in tun*, ro-Uooontod omtMitfKiitliaisr the aa®o i m i at ttio rooarro

feasko* oo that thero wa» no matortfil ohassgo is tho total volwe of Boaaral

N « « m teik aroalt in aaa*Ox>en~market policy* -

ftso ro lw m of open-artoot M A l a g i with whioh tfc« roaorro banfco antorad

tho jfttr 1929 pat %hm In paaaaooton of i» ln»ti*nr4»l for tooting

tho fo g rm of 4apas&anaa of tha oraflit atroatava u $m i**MwraX yaooiiro bank aa*

eorsaodation an*i for pXaoii$ the Initiative u pm vm-\rnr feaafca to Aotom im tho▼olarto of raaarvo hsuls oratit roîroO to naaot th& naaia of tftsoinoo* a&»i iit&ao*try* for In rodieoosmt ojara felon* th« l»itlaUv© to takin fey tho *a«&atwhioii borrow fras the reoorre banko at the oot&bXioho* aiaaoimt rato, t M | | la

OjMM&artaot ojparatiimo tfeo initial Ire la toaum lagr tlie raaarra biuiko* wfeioh Iwyor aall ohort tmm oaaorltioa la tlso Lartoot Xangaly at tbolr own voXitioa and

at aarfcat ratao* Hi© faot that tho rotation of apNMasfcat boltings daring/t+cxk

1929 aaa fo>laaa* tgr an waonat of dlioonstlBg fey xfwpff- ap} r o&iaataXjr

Igli tfaoqual to tho vo ltm of r«aaiU v i tM ia n f 1— 11 - > » ■«

I f ôOaral rosonro %aa)» Irailoatocl that to ta l voltaw of raaorvo teilr aro^lt

oatotaiKiir^ wa» not in o*oo«« of requiresaonto*



I ^DECLASSIFIEDAuthority h o /2 jf5 'S '

3 .

Fodoral r u m oroult d s r ia i th o y*ar bam boost rofleototi c & itf ly

fcft i jp03a*0lNPlBOt ojporatioao# 4» ID* ag&rogato fio aa* o f tho ootsatry for rooorro lu s t o n l i i *»y *o n o t t i l lH r through n U i m i i o r opo»-»a*feot ojw ratlo& a, tho iNtnl iMrt foil that thooo in h » m » of axtoaftix oroAit rnwli itbrought la t o Iwumovgr* B io Board, th erefo re* Is i*»mf I929f A|»poiato6 a oom»

« l l l « i o f off loom o f rooorvo baaka to t i t in oonftmet to a w ith tho l o n i la

offootiag » aoro o o o $ lo to o o a r ila a tlo a o f o i l ^poft-aarfcot op oratioao o f tho

roaorra bosfca* l e lh oa tfcolr own aoooaat aaa la tio m o t U w o f o r i m la gcworwaont ooouritloo fo r tho froaaary * • f io o a l agonto o f th* gerar»®o&i«

tho tisso tho ooimlttoe iw o^fol^to&t ftodaral Moiorro Boari a*«$tati

tho arijMtl&lotWT 'inrp O

"that tho %im9 s*»nor# oh&raotor and toIuc#* of opoa-taaTleot itMroatrscmta jurohaaod ,.%doral reserve b&jifc# bo $anror&o& with primary r«g&r$ to tho aooeessodatlori of c erroroo arid bustaoao 0Mtf to tho #ffeot of a^eh purohaaoo or oaloo on tho gonona orodlt sltmUoo**

A* Ha* 4ot prorldoo ilo t &*» oocmt ratoo ohall' to fixe* "with a rloo of

aoooc9g«o&aUag aot««roo aai b*i« laoa» f ** the aiof»tloa of thio prli)el|i|o dofiuttoly

oatahliaho* opoMawrteet polioloo cm tho aoeao boala a# 4i«ooo&t poiialoo. Oj>oa~

aarfcat oporafcltroo pro* I da a ouohio*> of orodlt botaaea the Alroot borroalngo

of aowfear badso oshi fch© Ktt&oy sarfcat* mm haro f&oilttato* tho flow of o re tit - JLA^ L/( d ^ A4& w * m aA jk^'bac <~*ZJa.

Into *m oat of the rooarro baafeav fa aBolia way ** to\Jr©duoo tho toa&oiwgr

toward jaria&lota tightaaos of coaoy foawtrly fa it by buoinoao Is: th*i «prl»^

on& b®r agriaaitaro 1b the autueai* Xa&oo*9 opoxMwlcot og>oratloao» jartleularly

oolos of oaoarltloo, haro j.arevo« to bo a v&lna\sl« n&Jmiot to tiooomt j&lioy*

the ml dot la f Inoaoo whioh oaloo of ooearltieo by rooorro banSoi oaorto bi^9at Ur*&« «rold tho aooooslt r for y««orttfig to th« rmjor infltioiioo of a otai^e


DECLASSIFIED Authority b o /2 J ? 5 ~ f


4 .

ft* Alsootm t jtaI m *

XUoauat rate ohsngfto In were fm r tiao* !ss frx? other y««r in the

Hiotory of fils# ay»t«sr,# Aareaoeo in 4iseea&t A la i froa 4 per oetifc to 4& por

oeat *t tlie P#4o*»i m*<mm bmM* of Booto®* I«ew ¥orkt «n& 3an famoiooo m

ssade early in tint year, a»& el&oo that %im the l i r e l of r&tee too feeoa the

»»m «it a ll tiie m tr r i With the growth of i l s m t t i howerer* «hi«b

*oooag*alea tli» iftaotian in the heldin@» of government eeouritiee, the iurlu-

•iioo of «xi*tiag ratee mm extended to * larger of the

total f doreX i» i«m te le orodlt in «*o9 w& ttw ooot of obtalaiBg reeerre

talk: erewit woo born* saore ir«aUy by mesfter Utnate* &wngoo in diecww&t xmtoo

attract nore.atteetloft tltexs opoMfericet operatiowe, a&d yet tearing the poot yoar

twziKtBAof oe«iriUeeA8sr*fie reeerre banka hae betas m in^ortent iKflue&oo*

the wooisXy et&teeaenta of oomUtiea of &*# .$»der*X m orve tank* give fu ll jaifc*

11city to the m.mm% and <**«poelti©n f epei>-»artoet holding* ao*s eaolGo i t pooeibXeft

for the pabilo to feXlow tfceoe changes - frorc week to ww&«- - • - - . 4-4 i n o r z



DECLASSIFIEDAuthority £{) / Z ?5 f

7 ^ ....... i

Governor Strong, Mr, Jay and Dr, Stewart appeared before the Board and submitted a revised draft of the statement on the subject of open market operations for insertion in the January issue of the Federal Be serve Bulletin, and after discussion and the suggestion of various amendments, these gentlemen withdrew from the meeting to rewrite the statement for submission to the Board at a meeting to be held at 2:30 this afternoon*December 19, 1923

At this point governor Strong, Mr* Jay and Dr* Stewart entered the meeting and submitted to the Board final draft, as follows, of a statement on open market operations during the years 1922 and 1923, for insertion in the January issue of the Federal He serve Bulletin:

"Constancy of reserve bank credit* - At the Federal reserve banks discounts increased rapidly during the year, but there was a corresponding decline in open market holdings, with the result that total earning assets remained relatively stable. In fact, as shown by the chart, relative stability in the total volume, with changes in the composition, has been the principal characteristic of Federal reserve bank assets during the past two years.During these two years the country steadily used from #1,000,000,000 to fl,200,000,000 of reserve bank credit. In view of this relatively constant demand, the years 1922 and 1923 afford an opportunity of observing the effect of changes in the volume of open- market holdings upon the volume of member bank discounts. This changing relationship was commented on in the May and July issues of the Bulletin, and it now seems appropriate, at the close of the year, to make a more complete review of the relation between the two elements of Federal reserve credit policy — rediscount operations and open-market operations.

In the early part of 1922 the reserve banks purchased a considerable volume of short term Government securities in the open- market, partly for the purpose of obtaining earnings, and in 1923 they greatly reduced their holdings of these securities. In the absence of change in the aggregate demand for reserve bank credit, the increases in open-market purchases during 1922 were offset by a corresponding decline in the volume of discounts, and in 1923 the reduction in securities was accompanied by a substantially equivalent increase in discounts*

In 1922 when the reserve banks bought securities the funds which they paid to the sellers found their way into member banks and permitted these banks to repay an equal amount of their rediscounts. The aggregate amount of reserve bank credit in use was not increased or even materially changed; a certain amount of their iTediscounts* were merely thus converted into ♦securities**But the effect on the member banks, particularly in the large centers, was to add to their loanable funds or to enable them to reduce their indebtedness at the reserve banks. Under such conditions banks are likely to lend more fully to their customers and others.



d e c l a s s if ie d

Authority /Z 75'J'

Ileoeniber 19. 1923 (Cont'd)In 1923, on the other hand, when the reserve banks reduced

their security holdings, they withdrew from the market an equivalent amount of funds. Following the withdrawal, the market borrowed substantially the same amount from the banks; and the banks, in turn, rediscounted substantially the same amount at the reserve banks, so -that there was no material change in the total volume of Federal reserve bank credit in use*

Open-market policy. - The volume of open-market holdings with which the reserve banks entered the year 1923 put them in possession of an admirable instrument for testing the degree of dependence of the credit structure upon Federal reserve bank accommodation and for placing the initiative upon member banks to determine the volume of reserve bank- credit required to meet the needs of business and industry. For in rediscount operations the initiative is taken by member banks, which borrow from the reserve banks at the established discount rate, while in 'open-market operations the initiative is taken by the reserve banks, which buy or sell short term securities in the market largely at their own volition and at market rates. The fact that the reduction of open-market-holdings during 1923 was accompanied by an amount of discounting by member banks approximately equal to the volume of funds withdrawn from the market by Federal reserve banks indicated that the total volume of reserve bank credit oustanding was not in excess of requirements*

Federal reserve credit policy during the year has been reflected chiefly in open-market operations. As the aggregate demand of the country for reserve bank credit may be met either through rediscount or open-*market operations, the Federal Reserve Board felt that these two methods of extending credit should be brought into harmony. The Board, therefore, in April, 1923, appointed a committee of officers of reserve banks to act in conjunction with the Board in effecting a more complete coordination of all open-market operations of the reserve banks, both on their own account and in the execution of orders in government securities for the Treasury as fiscal agents of the government.

At the time the committee was appointed, the Federal Reserve Board adopted the principle:

•That the time, manner, character and volume of open-market investments purchased by Federal reserve banks be governed with primary regard to the accommodation of commerce and business and to the effect of such purchases or sales on the general credit situation.!

As the Act provides that discount rates shall be fixed 'with a view of accommodating commerce and business,1 the adoption of this principle definitely established open-market polj -jftp; — saaae.basis as discount policies. Open-market operations provide a cushion of credit between the direct borrowings of member banks and the money market, and have facilitated the flow of credit into and out of the reserve banks, in such a way as to exercise a steadying influence in the market and to reduce the tendency toward periodical tightness



DECLASSIFIED^

December 19, 1923 (ContM)of money formerly felt by business in the spring and by agriculture in the autumn. Indeed, open-market operations, particularly sales of securities, have proved to be a valuable adjunct to discount policy. The minor influence which sales of securities by reserve banks exerts may, at times, avoid the necessity for resorting to the major influence of a change in discount rates.

Discount rate changes in 1923 were fewer than in any other year in the history of the system. Advances -in discount rates from 4 per cent to 4§- per cent at the Federal reserve banks of Boston, New York, and San Francisco were made early in the year, and since that time the level of rates has been the same at all the reserve banks. With the growth of discounts, however, which accompanied the reduction in the holdings of government securities, the influence of existing discount rates was extended to a larged proportion of the total Federal reserve bank credit in use, and the cost of obtaining reserve bank credit was borne more directly by member banks. Changes in discount rates attract more attention than open-market operations, and yet during the past year changes in the volume of securities held by the reserve banks has been an important influence. The weekly statements of condition of the Federal reserve banks give full publicity to the amount and composition of open-market holdings and make it possible for the public to follow these changes from week to week."

Mr. Hamlin moved that the statement submitted be approved.

Carried#



DECLASSIFIEDAuthority S{J

December 17, 1923

3 3 3-

The Governor presented a letter dated December 14th,^addressed to him by the Chairman of the Federal Reserve Bank of New York advising that at a meeting held on that date the directors of the bank had discussed the matter of participation in the program contemplating the purchases and sales of short term government securities, suggested by the Open Market Investment Committee under the terms of the Board*s resolution of December 3rd, and that while they had voted to participate in the purchases and sales and are in full accord with the general purpose for which such purchases and sales would be made, they are a impressed with the necessity of an appropriate public explanation oonf cerning the whole subject of open market operations and without some I (_/o n ■? r* a-vvn! J 4.1* — J ___i ^ - __ J__ Isuch public explanation may wish to reconsider their decision to participate in the plan.

The Governor then stated that he had invited Messrs. Strong and Jay to meet with the Board in order that the members might have first hand information regarding the attitude of the board of directors of the New York bank in this matter.

After a full discussion of the advisability of publicity such as that suggested by the New York directors, and the form which any statement issued by the Board might best take, Mr. Hamlin moved:

”It is the sense of the Board that some statement on Open Market policy be made in the January issue of the Federal Reserve Bulletin".

Carried, Mr. Miller voting "no",

The Governor appointed Mr. Hamlin as a committee of one for the Board to cooperate with Messrs. Stmong and Jay in the preparation of a form of statement to be submitted to the Board later.

December 18, 1923

At this point Governor Strong, Mr. Jay and Dr. Stewart joined the meeting and submitted to the Board draft of a statement on the subject of open market operations for insertion in the January issue of the Federal Reserve Bulletin, prepared in accordance with the action of the Board at its meeting on yesterday.

After discussion of the statement as submitted and the suggestion of several minor amendments, Mr. Hamlin moved that the committee return to conference and prepare a final draft of the statement for transmission to the Board at a meeting to be called at 10:00 oTclock tomorrow.



DECLASSIFIED Authority /Z 9£T f

F o r m N o . 131.RESERVE

Office Coiresponde jceFEDERAL, res

/ BOARD

T o__ Mr. Sfeswart__From_ Mr. Host on, Secret try.

Subject:^.

2— 8498

As Secretary of ths Cozonittee on Dlsoount and Open Market Polioy, you are adTised that Mr. Miller’s proposed new plan for stating reserve positions at the Federal Beserve banks involving gold polioy was taken from the table and referred to ths Committee on Bisooant and Open Market Polioy, said Comaittse consisting of Mr. Miller, Mr. Platt and Mr. Cunningham*

RECEIVED

J U L - 2 1923

DIVISION OP A N A L Y S I S & RESEARCH.



"^DECLASSIFIEDAuthority £ (9 /Z ?5~f

D tam m w m m m m w u v L . DEC 18 1939

MlmtM of wm%im Wrm&m* i f *— ~I t t Z , m% M M j m n

5ho Oowiltto* m* at S*SO p*»*t on Hormisr 8th* in Hr* snuior**

mooxttt Mr* m io r t ??r* * l* ttf **• s««rot**y# ox* «r* ln®t« and

I2r» OUbort !gr lMr*t*ti««u21* Coaaittoo m m « otmaldoratloti of the boot ®*thod of putting Sat*

operation tho ooporoto y u m ratioo* tar* s tm f t roporto* tt* t Igr •*•***«*

ring tho Smioi i d Ol*roloi>4 to to fre» tlao 90 por moI to 100 for «t»t ol**ftt

the UijmoopolU bonk Ivw %feo TO por M i to th© 90 por ooat 4lM», ond tho

EirfMR* M i l»m tho $0 por ooot to ttio «® por ooat oXaoo, i t would hm* Urn poooiblo to fflointai* fe rity tho firo t 10 raotitfco of l» 3 * art* rot**** r*ti* f«*

t&o %*t«® &%«i« tho 90 por m l atoiim * Mtor oomo *i»o*»*i«» I t M oowotadod

th*t tho boot plos* of prooofturo imo to fellow t&o aotfcMt Indicator In tl» mmvm* dsoEi projootod to th* M t m «* ^Brow^or fH iy^lt **» tho MM* «f tho Oowwittoi

that tho plos t im ll to p it Into e*o*ati0» oorl? im 19B4, thot *g»rmto a tto rn*

•houlu bo Maintains «&*!*»* notoo o* dopooit* by oaoh individual taafct ttmt

ooto and dopooit retort* m tioe for tfee %t&«n oboold bo jwblltlkod voeftOy bgr tfe*

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(nr* olio ooulti »ot bo »4rooo»t m m tbo itatedttoo f ir of aot«(MM IH Sbt tMo illM*)


declassified

Authority &Q /Z ?5~f


*»

mm oum&ltM oosaldwrou tha pror/oaol m6» to !5r« a U b o rt'a l iM i t o f Aogoat

6tta w ith regard to gold m w n M 17 f t r t m l w * * f» taunts. t f ta r d la«a*i«> . o f tha

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2m « b M thAt tba SMwml -m»orra mum, tMlm la oooj/*r*tion

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tha ?aar 1*M Mi ataoant of goU aartmoataa to an asgraeata amount

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DECLASSIFIEDAuthority


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thi OcBmitfcsa wit& a ft&lar axgdana&ion of Ms proposal for rooogniai*® in

discount rate pollor tho dlffbrano® Ijofewon p i^ r nfeiob fcao a standing In

tha Of®» nartet, cmofc as banters* aooopt&noas and Sraas'arsr Osrtifioatas, anA

paptr ptfftftontad for diaootmt xar uhlofc thar® la no oj»n a » » l , cuatotw^

netoa and lino of evadlt £o«Aa« His 1ft t tor to Ckworflor arisol^gar* In w itfh

tfaa .plan m s f lre t pmentftA, io fllod wltfe tho aimtft* of this mQtim*

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uotnlaor#

%ltor W. 3tomrtf Soorofear of CNxsnittoa*



DECLASSIFIED Authority &Q/Z.7ST

r

Fe d e r a l R e s e r v e Ba n k

o f Ne w Y o r k

IN REPLY PL EA SE REFER TO A1' BO G December 14, 1923.

DEC 1 ? s 1923S i r s :

man of the Open Market Investment Committee dated December 12 was read and considered. It invites this bank to participate in a programme contemplating

the purchase and sale of short term government securities through the open

market investment committee under the terms of the Federal Reserve Board’s resolution of December 3. The invitation and the programme it involves were

fully discussed and while the directors voted to participate in these purchases

and sales, and while they are in full accord with the general purpose for which

such purchases and sales would be made, nevertheless they expressed certain

reservations not directly relating to that general purpose which they requested

me to present to the Federal Reserve Board.

voluntarily places its funds in the money market, such purchases, under present

conditions, merely create a condition in the market which enables member banks

to reduce their borrowings at the reserve bank. On the other hand, sales of

such securities under present conditions, merely create a condition in the

funds the reserve bank has withdrawn. In neither case is there a change m

the total volume of reserve bank credit in use. The conversion of a certain

portion of this credit from "rediscounts and advances" to "securities purchased,"

or vice versa, has the effect of relieving member banks from borrowing, or of

When a reserve bank, by buying short term government securities,

market which causes member banks to borrow at the reserve bank to iLSp-L&ce the



DECLASSIFIEDAuthority /2JJET&

10 Federal Reserve Board 12/14/23,F E D E R A L R E S E R V E B A N K O F M EW Y O R K ...

impelling them to borrow, as the case may be. The extent to which they are

borrowing at the reserve bank has its effect, in turn, upon the amounts they

may be disposed to lend to their customers, as well asi upon the rates they may

charge.During 1922 and 1923 considerable amounts of short term Government

securities were purchased and sold by the Federal Reserve Banks for various

purposes, including that of exerting an influence on credit conditions and of

changing the form in which reserve bank credit was extended. The effect of

such transactions has now been observed and in admeasure tested. The present

programme proposes that, as a result of such observation, the Federal Reserve

Banks, with the approval of the Federal Reserve Board, should now put them

selves in a position which would enable them in future to use this means of

exercising an influence on credit conditions if occasion should &rise. Such%

open market operations are a valuable and a moderate method of influencing

credit conditions — a method well recognized abroad, by banks of issue and by

bankers and the public, but not yet understood by the public in this country,

even though-expressly provided for by the terms of Section 14 of the Federal

Reserve Act. However clearly such alterations are set forth in the weeklyt

statement of the reserve system, nevertheless the public as yet is accustomed

to look almost exclusively to the discount rate as the reflection of Federal

reserve credit policy.Under these circumstances the directors question the wisdom of the

Federal Reserve System*s entering upon a further purchase of securities with the above purpose in view, unless an appropriate statement to the public is made by the Federal Reserve Board, in the bulletin or elsewhere, explaining not only the purpose and effect of such purchases and sales but also the method

and machinery employed in effecting them. The directors realize entirely the

wisdom of having a committee of Governors, appointed by, end operating in

V


declassifiedAuthority /2 J 7 5 ^ f


FED ERA L R ESER V E BANK O F NEW YORK .. F e d e T & l R © S © r V 8 B O & r d 1 2 / l 4 / 2 3 •

conjunction with the Federal Reserve Board, with authority to recommend a

policy from time to time to the several reserve banks which participate in the

programme a,nd, when that policy has been approved, to execute it. But the im

portance of the programme, and of the advisory and ministerial functions of

such committee, together with the fact that the committee is created under gen

eral, rather than specific, provision of law, has impressed our directors with

the necessity of an appropriate public explanation concerning the whole subject.

They wish me to say that without some such public explanation they

may wish to reconsider their decision to participate in the plan and might later

prefer to dispose of the securities bought in accordance with it, as and when

they think proper.In this connection, our directors also request me to say that while

they recognize the advisability of having some central control over the dispo

sition of these particular securities, as indicated in the Federal Reserve

Board*s resolution of December 3, nevertheless, in thus accepting the invita

tion to participate in this plan they understand that their authority relating

generally to the purchase and sale of Government securities remains as defined

in Section 14 of the Act.i’ith regard to the programme generally and what is sought to be ac

complished by it, our directors, as I have said, are in hearty accord; and

the reservation which they express to our participation in it is ®ade with

no desire to impede its progress but merely to suggest the desirability of a

public understanding of it which they believe will contribute greatly to its

success.

Federal Reserve Board, Washington, D. C.Digitized for FRASER




/ 2- /

December 129 1925The special committee appointed at the meeting on December 6th

reported on its investigation of the origin of the Washington despatch appearing in the New York Journal of Commerce under date of December 4th, with reference to the meeting of the Board with the Open Market Investment Committee for the Federal Reserve System, held on Monday, December 3rd,

The report was read and accepted, and upon motion the special committee was discharged.


DECLASSIFIEDAuthority b g /2J?SO'

4

F e d e r a l R e s e r v e B a n k

o r N e w Y o r k

December 12, 1923

Dear Mr. Eddy: ’&***(?

Referring to your letter of December 5, 1925 addressed

to Governor Strong as Chairman of the Open Market Investment Com

mittee, and Governor Strong^ reply of the same date, I am now en

closing copy of letter written to-day by the Chairman of the Com

mittee to the various Federal reserve banks, which letter is ac

companied by a copy of the resolution of the Federal Reserve Board

dated December 5, 1923.

I am also enclosing copy of the minutes of the meeting

held in Washington cn December 3. ^ ^ ^ f

Secretary, Open Market Investment Committee for the Federal Preserve System

Mr- Walter L. Eddy,Secretary, Federal Reserve Board, Washington, D. C.


Reproduced-from-the Unclassified /.Declassified^ldings of the National Archives

DECLASSIFIEDAuthority &Q /2J?5^P

I !' M MF e d e r a l R e s e r v e B a n k

o f N e w Y o r k

CONFIDENTIAL

December 1 2 , 1923

My dear GovernorPursuant to the arrangement made at the Joint Conference held in

Washington on November 12, the Committee on Open Market Investments held a meeting last week with the Federal Reserve Board at which the report (a copy of which was handed to you at the conference) and the subsequent recommendation of the Committee were considered.

The committee has now received a communication dated December 3, 1923, from the Federal Reserve Board, of which a copy has been sent to you by the Secretary of the Board, expressing its approval of the policy recommended by the committee. Please observe the terms of the resolution of the Federal Reserve Board.

After discussion of the Board’s resolution, the committee authorized me to advise you as follows:

Those banks whose directors decide to participate in the purchases, which will be considered to be a "special account,” will be understood to agree to turn in the securities so purchased for resale in whole or in part, upon receipt of advice from the committee from time to time.

Of course, participation in the account by each Federal reserve bank will be in the usual percentages, which are at present as follows:

Federal Reserve Bank of Boston 8.4$II tl ti tt New York 27. $tl II ti ti Philadelphia 8*1$II II ti »i Cleveland 9.7$II II tt ti Richmond 4.1$t l II tt tt Atlanta 4.8$II II VI ti Chicago 16.3$II II II ti St. Louis 3.5$II tl tl ti Minneapolis 2.7$II II tl ti Kansas City 3.4$tl tt tt it Dallas 2.9$II tl II ti San Francisco 9.1$

f

In case, however, the directors of any reserve bank now or hereafter decide not to participate, the proportion which would have been allotted to that bank will be divided among those banks which do participate, and a new percentage will be figured, of which the participants will be advised.

The procedure which now governs the execution of orders and transactions for the Treasury and for reserve banks is not modified as a result of this authorization.

Regular advices of all transactions in this account will be sent to all participating reserve banks as usual and the participants will be kept fully in-


DECLASSIFIEDAuthority &Q / Z ^ b &

- 2 -

formed of the conunittee’s activities; the account will be separately stated from other current transactions for account of the Federal reserve banks, or those for the Treasury Department, and the committee proposes, with the approval of the Federal Reserve Board, that whenever purchases reach the sum of $100,000,000, the Federal Reserve Board and participating' reserve banks will be asked to express their views as to further purchases.

You are asked especially to regard the confidential character of the matter and to advise the chairman of the committee promptly by wire of the decision of your bank as to participating.

This letter is sent you by direction of the committee*

Very truly yours,

Chairman, Open lfc.rket Investment Committee for the Federal Reserve System


--. '“’" x declassifiedAuthority &Q f 2Jf *S<T

1 ......................g the National Aichives

COPY OF THE BE SOLUTION OF THE FEDERAL RESERVE BOARD ___________ _ DATED DECEMBER 3. 1923 _____________

WHEREAS, The Open Market Investment Committee of the Federal Reserve System (Governors Strong, Harding, McDougal,

Fancher and Norris) has reported to the Board that it is exped^ ient at the present time that the Federal reserve banks be

given permission to assume a position toward the money market

by the purchase of a suitable volume of Government securities of short time maturities, provided such purchases can be made

without disturbing the conditions of the money market or of the market for Government securities,

NOW.,, THEREFORE, BE IT RESOLVED, That the Federal Re

serve Board declares itself in favor of the purchase of a

limited volume of short term Government securities at this time, it being understood that the Board reserves the right to

discontinue purchases and to require the sale of any of the

securities purchased in pursuance of this resolution at any

time it may deem expedient, andBE IT FURTHER RESOLVED, That copies of these resolu

tions be transmitted to the Chairman of the Open Market In

vestment Committee of the Federal Reserve System aadto the

Governors of all Federal reserve banks.



DECLASSIFIEDAuthority &Q / 2 C75><?

iceFEDERAL RESERVE

BOARD

iid>Investigati

Washington.vestigation - [and. James.

f t — v

fcoh appearing in the Journal of JCommerc e unde r date2— 8496of December 4th, with reference to the meeting of the Board with the Open Market I n v ^ ^ £ T “C b W m t r held Monday, December 3rd.

Pursuant to instructions from the Boara'"yeur..Xomnaittee prepared the following letter and addressed same to all persona present at the conference on December 3rd, viz:

Gov. Crissinger; Mr. Platt J Mr. Hamlin? Mr. Miller; Mr. Jamas’, Mr. Cunningham; Mr. Eddy, Secretary; Mr, Winston, Assistant Secretary of the Treasury;Mr. Stewart, Director, Research & Statistics Division^ Gov. Strong; Gov, Harding; Gov. Fancher; Gov, Norris; Gov. McDougal; and Mr. Mattison, Secretary ot Comnittee,

"December 6, 1923.Dear Sir;

The Federal Reserve Board at its meeting today appointed Messrs. Miller and Hamlin and myself as a committee to investigate the origin of the Washington dispatch appearing in the New York Journal of Commerce, under date of December 4, 1923, copy of which is herewith attached. In undertaking the investigation assigned to it, the coranittee is making the following identical request of each member of the Board and each member of the Open Market Investment Committee for the Federal Reserve System attending the conference with the Board on Monday, December 3*

Please advise the committee whether you discussed or made aaay statement in connection with the proceedings of the conference to any person other than a member of the Board» a member of the Open Market ^ Investment Committee or an employee of the Board.

Very truly yours, RCh r* t .(signed) George R. James, ta’i

Chairman."

Responses to this letter have been received from all of those present and all of the letters received, with one exception, categorically deny any conversation or reference to the matter referred to. ^ ,

i 4x4 tLgjctirThe one letteri to which exception is made, was from a member of the Board, who had conversation with Mr. Sargent, the representative of the Journal of Commerce in Washington.

o 192!

report.The letters are all attached hereto and form a part of the Committee^

\The Coianittee feels that the one letter referred tov-4lisc loses a proba

ble origin of the dispatch which was referred to the^ommittee o.r investigation and, therefore, asks to be discharged. x




.~P^3

A D D R E S S OFFICIAL, C O R R ESPO N D E N C E TO T H E FEDERAL. R E S E R V E BO A R D

FEDERAL RESERVE BOARD

WASHINGTON

December 10, 1923,

WfS:OEW

Mr. George B. James, Federal Reserve Board, Washington, D. 0*

Dear Sir*.I have vour letter of December 6th(

concerning the origin of the Washington dispatch appearing in the New York Journal of Commerce and discussing the prospective open market operations,

I have not discussed or made any statement in connection with the proceedings of the conference to any person who was not either present at the conference or an employee of the Board.

Yours very truly,

Walter W. Stewart, Director, Division of Besearch & Statistics




Authority &Q/Z ?5~f

IFEDERAL RESERVE BOARD

W A S H IN G T O N

December 8th, 1923. _

Hon* George R. James, Member, Federal Reserve Baord*Washington, D. C.

Dear Sir:-

1 h a v e 7 Q u r .....w h i o hyou advise of the coramittee appointment made by theFederal Reserve Board and the object which made thisappointment necessary.I also note your request as follows: "Please advise the Committee whether you discussed or made any statements of the proceedings of the conference to any person other than a Member of the Board or a member of the Open Market Investment Committee or an employee of the Board•" In reply thereto I desire to inform you and your Committee that to the very best of my recollection I never mentioned or discussed the matters that were under consideration at the time of the conference with the Open Market Committee with any person outside of those who were in the session of the conference and only with them at the time of the conference. I have no recollection of ever having mentioned the subject outside of the meeting in which it was discussed.

Yours very truly,



D e c l a s s if ie d

Authority &Q

F E D E R A L R E S E R V E B A N K O F B O S T O N

December 8, 1925.

My dear Sir:

In reply to your letter of Iwish to say iKai"x aia 'drs^sT'nor make any statement in connection with the proceedings of the conference of the Open Market Investment Committee with the Federal Reserve Eoard, which was held in Washington on Monday, December 3, 1925, with any person other than a member of the Board, a member of the Open Market Investment Committee, or the Secretary of the Board.

Very truly yours,

ing,Governor,

Eon. George R. James,Chairman of Special Committee, Federal Reserve Board, Washington, D. C.



DECLASSIFIED Authority bo/2Jf5~^

FEDERAL RESERVE BANK OF CHICAGO2 3 0 S O U T H L A S A L L E S T R E E T

O F F IC E O F T H E G O V E R N O R

December 8, 1923*

CONFIDENTIAL

Federal Reserve Board,Washington, D. 0*

Gen11 emen: Attention Mr. George R. James, I am today in receipt of your lettggj^ J ^

6th\instant t advising of the appointment of a coffiTfee t oninvestigate the origin of an article published in the Hew York Journal of Commerce under date of December 4, 1923,^ and in response to the inquiry contained therein,/! am pleased to advise you as follows:

Prior to the date referred to I did not discuss nor did I make any statement in connection with the proceedings of the conference to any person other than a member of the Board, a member of the Open 13arket Investment Committee or an employee of the Board. I fully realize the extremely confidential nature of the entire matter and consequently when upon my arrival in Boston on the morning of the 5th instant, my attention was called to the article, I instantly recognized that a serious and extremely unfortunate mistake had been made.

Very truly yours f


Holdings of the National Archives


FEDERAL RESERVE BANKOF DALLAS

December 8# 1923

Federal Reserve Board,Washington, D . C.

Attention Mr. Eddy

Gentlemen:The Boards letter of December 5^ 1925,

quoting resolution adopted on that day by the Federal Reserve Board expressing the approval of that body for the purchase by Federal Reserve Banks of a suitable volume of Government securities of short time maturities, was received yesterday morning and read to our Directors at their regular monthly meeting held during

the day*



DECLASSIFIED Authority /Z ^ j T d T

T H E U N D ER SEC R ETAR Y O F T H E TR EA S U R Y

W ASHING TO N

December 7, 1923

Dear Mr. Jam es$

I have your lette r of 6thJ with reference to the

Committee on Open Mar ice t Operations. I have discussed the meet

ing of Monday with no one except Secretary Mellon and those who

attended the meeting. I did not talk with Mr. Mellon about this

until Tuesday morning, which was after the publication of the

report in the lew York paper.Very truly yours,

Honorable George B. James, Chairman, federal lie serve Board

Investigating Committee, Treasury Department.


DECLASSIFIED Authority /Z 7 5 ~ f


a i N o . 131.

C 'fice Correspo* rti„ceT o _

From.

Federal Reserve Board. M r. J ameg, ________


Subject:.

Date_UeC^ 7 , 192&,—

.........3 .... J?:

With reference to the investigation conducted by the special committee, of which I am Chairman, I beg to say that I have not at any time discussed or made any statement in connection with the proceedings of the conferences to any person other than a member of the Board, a member of the Open Market Investment Committee or an employee of the Board#

M iso-87



DECLASSIFIEDAuthority &Q {2J7ETF

I


W A S H IN G T O N

O FF IC E O F G O VER NO R

December 7, 1923

Dear Sir:This will acknowledge and answer your letter of

jjecembar 6./You are advised that I had no conversation with

any newspaper man or men, or with anybody, else concerning the Open Market operations which were under consideration at the joint-conference of Governors and the Board# The article that appeared in the Hew York Journal of Commerce under date of December 4t 19?-* r,r'+- inspired by me,or given out by me, or thoue , and was at notime authorised by me and I -edge of it#

You are further advised that I talked to no person in lew York, to no newspaper man or men, to no other person or persons directly or indirectly, nor did I authorise any other person to so talk for me or represent me, nor did I give expression to any of the thoughts appearing in the article of December 4 to any person or persons,

reaerax neserve ^oara, Washington, D, C.



DECLASSIFIEDAuthority &Q /2-95*7

t 1


W A S H IN G T O N

O FF IC E O F V IC E G O VER NO R

December 7, 1923

Dear Sir:Complying with the request in the last paragraph of your

letier of T)acagiher„ 6th\ with relation *o the publication of the artTcie on open market operations in the -New York Journal of Commerce of December 4th, I may say that on Monday afternoon after my return from the Capitol, where I had gone to attend the opening of Congress, Mr. Sargent, who represents the Journal of Commerce, came into my office, ostensibly for the purpose of asking me to write an article on branch banking for the New Yearfs edition of the paper. Ve discussed the matter somewhat and then, as nearly as I can recall, he said in a rather casual way "By the way, what is this Open Market Committee doing here today"? I replied that the Committee met from time to time to discuss details and report, and then he remarked that the open market holdings of Government securities were at a very low point, to which I replied in the affirmative, stating that he could see that from the last weekly statement of the federal Eeserve Banks. Nothing was said about any action by the Federal Beserve Board or of any desire or intention on the part of Federal Reserve Banks to purchase securities. He showed disposition to ask some further questions, when I told him ti at if he wanted any further information he would have to go to the Governor.

Yours very truly

Hon. George R. James, Chairman, Special Committee,

Federal Reserve Board.



DECLASSIFIED Authority & n /2 - 9 £ T F

*? 7

December 6* 192$

Dear Sirs / J U t

the Federal fieserre Rop'd at its moating today appointed Messrs* Miller and Usplin, and nys-elf m a eoBsaltteo to investigate the origlx* of the :v&shingtor* despatch upbear!* <, in the fork Journal of Commerce, und@r date of Seco, bar 4* 192S^ copy of sdiich is herewith attached* In iui VrtfJJLr j ih^ investigation assigned to it, the com:iittoo is :aaJfcing the following identical request of each member of the 3oar& and each r.er:iber of the Open Karkset Investment Committee for the Federal Reserve System attending the conference vrith the Board on Monday, December 3*

Please advise the comittee whether you discussed or m d e any statement i n connection with the proceedings of the conference to person other than & siember of the Board* a macaber of the Open Market Xhveatacnt ConsdttM or an employee of the Board*

Tery truly yours*t

George R* James, Chairtsum

Hon. G* B* Winston*Assistant Secretary of the treasury*

u&s:dngton, D* 0*



DECLASSIFIEDAuthority Z

F o r m ! f o . 131.

Office Correspon 3 zeT o ________Mr* James ....... ...._

From_______Hro Miller.... . ......

Replying to vour inquiry of.the 6th instX I am writingto say, with, respect to the origin of the Washington despatch appearing in the New York Journal of Commerce under date 'of December 4, 1923, with reference to the proceedings of the Conference of t$e Board with the Open Market Investment Committee, that I Mid not speak of the matters before the conference to anyfine who was not present at the conference. To be more specific, I talked with no member of the press nor did any member of/the press undertake to get any information either from me or from my office.

FEDERAL RESERVE BOARD Date jecember 7, 1923.

Subject:.



DECLASSIFIEDAuthority &{) /Z 75~f


WASHINGTON

A D D R E S S O F FIC IA L C O R R E SPO N D E N C E TO T H E FE D E R A L R E SE R V E BO A R D December 7, 1923

Dear Mr. James:Replying to your letter of December 6th j re

garding the Washington despatch appearing in the New \ York Journal of Commerce, under date ofDecember 4, 1923,\ with respect to the conference of the Reserve Bank Open Market Committee with the Federal Reserve Board on December 3rd, I vrould state that I have not discussed the subject of the conference with any Member of the Federal Reserve Board, any member of the Open Market Investment Committee, any employee of the Board, any person connected in any way with the Federal Reserve System or the Treasury Department, nor with any other individual.

I would state further that as a precaution against any possible disclosure of the purpose of the conference, I had prepared in my own office all written advices which the Secretary of the Board was instructed to prepare in connection with the conference, and all copies of such advices were immediately placed, undear/feealed cover and retained in this office rather than senV/co the Board* general files. / / /

Very truly yours///

Hon. George R. James,Federal Reserve Board,

Washington, D. C.



DECLASSIFIEDAuthority /2 95~f

Forr•” A


WASHINGTON

A D D R E S S O F FIC IA L C O R R E SPO N D E N C E TO T H E FED E R A L R E SER V E BO ARD

Dec. 7, 1923.

Dear Mr. James:

I have your le tte r off December 6 ^ and In

answer thereto would say that I never, at any

time, have discussed or n&de any statement in

connection with the proceedings of the conferences

to any person other than a member of the Board,

a member of the Open Market Investment Committee

or an employee of the Board*

Very truly yours,

Hon* George H. James,Chairman, Federal Se serve Board,

Washington, D* C.



DECLASSIFIEDAuthority f 2J?ET

Washington, D. C.,December 7, 1923*

Dear Sir:Replying to your letter of December 6th, ^

I had no discussion with, and made no statement to any person, other than those mentioned in your letter, regarding the proceedings of the conference, with the sole exception of Mr* Winston, Under Secre

tary of the Treasury.

Very truly yours,

Hon. Geo. R. James,Federal Reserve Board,

Y/ashington, D. C*



DECLASSIFIEDAuthority / Z C?5 F


o f N e w Y o r k

December 7, 1925.

Dear Sir:

I beg to acknowledge receipt of your letter of December

enclosing a copy of the Washington despatch which appeared

in the New York Journal of Commerce under date of December 4, 1923

in reference to the proceedings of the conference between the Open

Market Investment Committee and the Federal Reserve Board on Monday, December 5, 1923.

I have never discussed these proceedings with, nor made any statement regarding them to, any person other than a member of

the Federal Reserve Board,or a member of the Open Market Investment Committee, or an employe of the Board.

X

I. B. MATTESOK9Secretary, Open Market Investment

Committee for the Federal Reserve System.

Honorable George R. James,Federal Reserve Board,Washington, D. C.



DECLASSIFIEDAuthority / 2 C?E> &

F e d e r a l R e s e r v e B a n k o f P h i l a d e l p h i a9 2 5 C H E S T N U T S T R E E T

W'*:

G E O R G E W . N O R R IS , q o v e r n o r

W IL L IA M H . H U T T . d e p u t v g o v e r n o r

W IL L IA M A. D V E R . C A S H I E R

A S S I S T A N T C A S H I E R S

C .A .M C 1 L H E N N Y W .J .D A V I S J A M E S M .T O Y R .M .M I L L E R ,U R -F R A N K W . L A B O L D S . R . E A R L

R IC H A R D L .A U S T I NC H A I R M A N O F T H E B O A R D A N D

F E D E R A L R E S E R V E A G E N T

H E N R Y B .T H O M P S O ND E P U T Y C H A I R M A N O F T H E B O A R D

A S S I S T A N T F E D E R A L RESERVE A G E N T S

A R T H U R E . P O S T W A L T E R T .Q R O S S C U P

December 7, 1923

dear Mr. James:

I am this morning in receipt of youi‘..„lstter of December 6ifh jenolosing copy of the article which appeared in the New York

JJournal of Commerce on t h e 4th instant. I noticed this article on that day, and it is so prejudicial/to the success of the operation we plan that I was much disturbed by the publication, and am glad to know the Board is investigating its origin.

After the adjournment of our session in Washington on the 3d instant Governor Fancher and I lunched together at the Washington Hotel. I do not think that we discussed at all the subjects considered at the conference. If we did it was in a low tone of voice, and I recall that there were very few persons in the room at the time, and no one at the tables immediately adjoining us. Even if we did discuss these matters,therefore, it is impossible that anyone could have overheard us. When we finished lunch I went directly to the Union Station and took the two o’clock train to Philadelphia. I talked to no one on the train, and after my arrival in Philadelphia had some gentlemen from out of town dine with me, and after dinner I attended a public meeting. From the time that I left Governor Fancher I am absolutely certain that I never referred in conversation with anyone to the conference or even to the fact that I had been in Washington that day. I am therefore certain that the "leak" cannot possibly be chargeable to me.

I am,

Very truly yours,

Governor

Mr. George R. James, Chaiman,C/o Federal Reserve Board,

Washington, D. G.


Reproduced from the Unclassified I Declassified Holdings of the National Aichtves

DECLASSIFIEDAuthority {2J7ET7

O F F I C E O F T H E G O V E R N O R

December 7, 1923.

CONFIDENTIAL

Dear Mr, James:/Your letter of December 6 fis received, enclosing copy

of article appearing in the "'Sew York Journal of Commerce of December 4X 1923,, of which I had previously learned with much

Answering your question specifically - I did not discuss the proceedings of the conference with any persons, except members of the Federal Reserve Board and of the Committee; neither did I discuss or rnf.ke any statements in connection with same.

I recall quite distinctly in our discussions on Monday afternoon, the third, that I made mention of the fact that it was very important that the Board’s communication to the Governors of the twelve Federal reserve banks conveying copy of the resolutions passed at the meeting on that date, be a confidential one, and also that the letter of the Chairman of the Committee to the banks be a confidential communication.

I think that I have full appreciation of how carefully the committee should guard the procedure it follows in connection with its Open Market Operations, and I also think it most unfortunate that the article appearing in the Journal of Commerce on December 4 end 5 should have gained publicity.

F.BDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIED Authority / 2 , <y>5~«T

FEDERAL RESERVE BANK OF CHICAGO2 3 0 S O U T H L A S A L L E S T R E E T

F F 1C E O F T H E G O V E R N O R

December 7, 1923.

CONFIDENTIAL

Mr. Walter L. Eddy, Secretary,Federal Reserve Board,

Washington, D. 0.Dear Mr. Eddy:

am in receipt of siour confidential letterof the 3rd/instant, setting forth tKe "resolution.acTopfeSnBy the Federal Reserve Board in pursuance of the recommendation of the Open Mb,ricet Investment Committee with respect to the purchase of a limited volume of short-term Government securities at this time, and further advising that full details of the procedure to he followed will be received from the Chairman of the Open Sferket Investment Committee.

The Board’s resolution was referred to our Executive Committee today and a decision reached that this bank will participate in the plan as adopted.

L Very truly yours,




Authority &V/Z.75T


WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO ” THE FEDERAL RESERVE BOARD

December 6, 1923.

Dear Sir:The Federal Reserve Board at its meeting today-

appointed Messrs. Miller and Hamlin, and myself as a committee to investigate the origin of the Washington despatch appearing in the New York Journal of Commerce, under date of Decenber 4, 1923, copy of which is herewith attached. In undertaking the investigation assigned to it, the committee is making the following identical request of each member of the Board and each member of the Open Market investment Committee for the Federal Reserve Systen attending the conference with the Board on i-onday, December 3.

Please advise the committee whether you discussed or made any statement in connection with the proceedings of the conference to any person other than a member of the Board a member of the Open Market investment Committee or an employee of the Board,

Very truly yours,

George R. Jairies, Chairman

Hon, D. R, Crissinger, Governor,Federal Reserve Board,

V/ashington, D, C.

' 7 7 > dDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIEDAuthority S{) / Z C75<f

A

X-390^

ARTICLE APPEARING IN THE NW YORK JOURNAL OF COMMERCE Tuesday, December k , 1923*

RESERVE BANKS TO BUY U. S. SECURITIES

HOLDINGS ARE FOUND TO BE ALMOST AT MINIMUM.

Open Market Committee Confers With Board - May Obviate the Necessity for a. Change in the Rediscount Rates.

WASHINGTON, Dec. 3 - Renewed purchasing of Government securities in the open maxket by the Federal Reserve Banks on a. considerable scale wa.s expected tonight to result from the meeting of the Federal Reserve Board with its special committee on open rrarket operations. The Reserve system1 s holding of Government securities were found to be almost at a minimum.

The open market committee, which includes in its membership Governor Strong, of the New York Reserve Bank, and Governor Harding, of the Boston Reserve Bank, the former governor of the board, met today with, the board and was understood to have gone over the Government security holdings of the various Reserve banks in the light of the probable extent of future purchases under the system*s uniform open market policy.

MAY OBVIATE RATE CHANGEOpen maxket operations of the Reserve system axe particulaxly important

in that their effect holds the possibility of producing results which obvia.te a- necessity for a change in rediscount rates.

According to the board*s latest reports, as of November 30, the entire holdings of Government securities of the twelve reserve banks is only about $£&• ,000,000, y\£iich is very near the low point for these assets, as compared with about $300,000,000 on approximately the same date last yeax. Moreover, probably as much as $50,000,000 of the ^resent holdings of Government securities represent bonds which the banks woulo be virtually unable to sell except at a loss, a.s bonds taken to secure circulation are included in the total holdings.

Hence the shelves of the Reserve -banks are getting bare of marketable Government securities and it is expected that the banks will shortly resume


DECLASSIFIED Authority &Q / 2 C7S <f


%

purchasing to replenish their stocks. Purchases proba.bly will be devoted in the main to Treasury certificates of indebtedness.

HOLDINGS OF ACCEPTMCES.

Holdings of bankers* acceptances by the Reserve banJks aggregate the .respectable figure of $269,000,000, as compared with $259,000,000 a year ago, but sales of these bills on any appreciable scale would probably involve a change in the rate, so tha.t if the Reserve banks are to continue the free use of the -uniform market policy it will be necessary to stock up on open Government securities.

Despite the failure of the Federal Reserve Council a.t its recent conference with the Reserve Board to discuss the rediscount rate levels, there is a. feeling in some quarters that a reduction of rates is in order. However, a resumption of purchasing in the open market by the reserve banks would result in more money being put on the market, or in other words, the extension of credit facilities by the reserve banks in the nature of an equivalent to a reduction in rates.




Authority

Deoember 6, 1925.

Dear 3iriThe Federal Eesorve Board at its meeting today

appointed Messrs* Miller and Batalin, and nyself as a ooamittee to investigate tho origin of the Washington despatch appearing in the Hew fork Journal of Conmeroe, under date of beom lw r 4, 1925, oopy of *diioh Is herewith attached* In undertaking the investigation assigned to it, the ooanndtteo is making the following idontioal re~ quest of each member of the Board and eaoh menber of the Open Market Investment Comlttee for the Federal Reserve System attending the conference with the Board on Monday, December 3#

Please advise the oomnittee whether you discussed or made any statement in oonneotion with the proceedings of the conference to any porson other than a somber of the Board, a member of the Open Harket Xnvestiaent Goamittee or an employee of the Board*

Very truly yours,

George B« James, Chairman

Hon, Btamd Platt,Federal Reserve Board,

Washington, D# C«


Reproduced from the Unclassified / Declassified Holdings of the

3

Deer S in

The Federal Reserve Board at its meeting today appointed Messrs* Miller and Hamlin* and myself as a oomittee to investigate tho origin of the £fe«hington despot oh appearing in the Hem York Journal of Coroseree, under date of Deeecaber 4# 192$# copy of which is herewith attached* In undertaking the investigation assigned to it, the earanittee is making the following Identical request of oaoh saeaiber of the Board and oaoh member of the Open Haricot investment Cossaittee 0or the Federal Reserve System attending the conference with- the Board on Monday* December $*

Please advise the cosrdttee whether you dis- eussed or made statement in connection with the pro* oeedings of the conference to any person other than a member of the Board f a member of- -the Opon Market investment Cewndttee or an employee of the Board*

Very t r u l y yours*

George E* James* Chairman

Hon* A* C* Miller,Federal Reserve Beard,

Washington, D* C*

National Archives

^ D e c l a s s if ie d - "Authority £2JJ5^f




A D D R E S S O F F IC IA L .C O R R E S P O N D E N C E TO T H E F E D E R A L R E S E R V E BO A R D


WASHINGTON

December 6, 1923*

Dear Sir:The Federal Beserve Board at its meeting today

appointed Messrs* filler and Hamlin, and myself as a committee to investigate the origin of the Washington despatch appearing in the New York Journal of Commerce, under date of December 4, 1923, copy of which is herewith attached* In undertaking the investigation assigned to it, the committee is making the following identical request of each member of the Board and each member of the Open Market Investment Committee for the Federal Reserve System attending the conference with the Board on Monday, December 55 •

Please advise the committee whether you discussed or made any statement in connection with the proceedings of the conference to any person other than a member of the Board, a member of the Open Market Investment Committee or an employee of the Board.

Very truly yours,

%Hon. Charles S« Hamlin,

Federal Reserve Board,Washington, D. C*


Reproduced from the Unclassified / Declassified Holdings of the National Archives

I DECLASSIFIEDAuthority £<9 / 2 ? 5 ~ i f

December 8* 1923

Dear SirtTho Federal Reaerre Board at it* meeting today

appointed Me*era* Millar and Hamlin* and m yse lf m a committee to investigate the origin o f the Washington despatch appearing in the Hew York Journal of Comeroe, under date of December 4, 1925, copy of which ie herewith attached* In undertaking the investigation assigned to it, the oom .ittec is making the following identical request of eaoh member of the Board and each member of the Open llarleet Investment Committoo for tho Federal Heserve System attending the conference with the Board on Monday* December *.

Please advise the cosLiitte© whether you die- oussed or raade any etateaent in connection with the proceedings of the conference to any person other than a iz&m~ bar of the Board, a member of the Open Market Investment Oemrtltfcee or an employee of the Board*

Very truly yoturs,

George E* Janeat Chairman

Mr* welter L» Eddy* Seoretary, Federal Baeerve Board,

^aehington# D*. C#

JLJUZ,"Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


^DECLASSIFIEDAuthority

/

/FEDERAL RESERVE B O # 6 d//

WASHINGTON /

i.v

A D D R E S S OFFICIAL. C O R R E S P O N D E N C E TO T H E FEDERAL. R E S E R V E BO A R D

iK %Decei >er 6, 1923 : / <\i• w

;'Vl)\f

Dear Sir:The Federal Reiser#© Board at its meeting today

appointed Messrs# Miller and Hamlin, and myself as a committee to investigate phe origin of the Washington despatch appearing in tner New York Journal of Commerce, under date of December 4, 1923, copy of which is herewith attached. In undertaking the investigation assigned to it, the committee is making the following identical request of each member of the Board and each member of the Open Market Investment Committee for the Federal Reserve System attending the conference with the Board on Monday, December 3*

Please advise the committee whether you discussed or made any statement in connection with the proceedings of the conference to any person other than a member of the Board, a member of the Open Market investment Committee or an employee of the Board*

Very truly yours,

George R. James, •Chairman

Hon. E. H. Cunningham,Federal Reserve 30ard,

Washington, D. C*



DECLASSIFIEDAuthority fZ^bf?


WASHINGTON

ADDRESS OFFICIAL. CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

December 6, 1923.

Dear Sir:

Cffhe Federal Beserve Board at its meeting today appointed Messrs, Miller and Hamlin, and myself as a committee to investigate the origin of the Washington despatch appearing in the Hew York Journal of Commerce, under date of December 4, 1923, copy of which is herewith attached. In undertaking the investigation assigned to it, the committee is making the following identical request of each member of the Board and each member of the Open l&xfcet Investment Committee for the Federal Beserve System attending the conference with the Board on Monday, December 3.

Please advise the committee whether you discussed or made any statement in connection with the proceedings of the conference to any person other than a member of the Board, a member of the Open Market Investment Committee or an employee of the Board*

Dr. 77. )7m Stewart,Director, Division of Research and Statistics,

Federal Reserve Board, v&shington, D. C#




Authority

5 3 j.

l> w 31r« X - l f d Y

fht Federal Baaarva Bouft at its seating today appolntad ISaaara* P illar and *$rs« lfa s a a o ea d tta a to Iw roati^ ata $*# o r ig in of wm W aahinffton daapatah a*>paariag in th a Kaw Jtm m alof CkaBoaxoa, v a te r data.of, a w M B f t l g m p j ofwhioh la bexmith attaahad* la amdaYtaadta tiia Inveati* nation aaalspad to ltv tha atnrittaa is waiting- tha i'ollowi identical raqraeat of aaah nerbar of tha $o«rji and aaah s»aefear of tha C£a*i Far tot toaatma&t Ctaoealttaa for tha Fadaral Beaarfa attaading tha aoafamaoawith tha Boat* «a Koiidagr* Daoaa&ar 3*

Plaaao advlae tha aowmittaa i&ethar you di»~ ouaaad or waia aaaor atatenant in acaaiioetion with tha pro** eaa&ln&t of tha eoitfar«moa to aagr paraon othar than a issasslwr ©f tha Board« a mmim* of the <5pa® IMfeat &svaat« mmt Qosvnlttaa ©r m msplojm o f the Beard*

Hwy truly ytmra*

Qoorga $• Jaraa* €hal*B«iu

l r , W* T. a . Harding, Ooramor, Fodyaipal Raaarra Baifit*

Hoatom* lltaa*

/U t '* / * / » *Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIEDAuthority &Q

\

3 3 3 .

Dmafetr 6, 1923*

}fear $ir$

Tim Keaorra SosrA a t tt* ra*oti:ri£today aj*potetod I i t irB i K iller sad Hiaslin, and atyaalf as a «o«wittoo to ixwoat l®ato tho origin of the ^ftiisg ton doqpatoh ajpoaring in tbo Fow Yotfc Jowrnul fit OoBnoMot wi4«r data of ftooamfcar 4* 1923* oopy of T&iieli is b» iw lth mttatihtd* la raiortaW ng tho invest i~ gation aaaigned to I t , tho commit taa ia snaking tho following idontioal reqoaat of eaoih io©fr&ar af tlsa Board and aaoti swnibar of ti*« €£o» l.*arfcat Savaatmanfc Coanittao for th* Fodaral Boson* SyatoK attending t&o ooi^sr suss with tho Board ois Honftoor* Pooonfeor S*

Plooso advise tho tomtit too shotbor yoo dls* otassod or mad* asiy atatofnoiit in ooimaotlon with lit© pro* oe©dings of tho oonfaranca to a»y person othar than a mowbor of tho- loard, a wm&mr of tfca Qpon Eario*t Investment Conrittee or an on|>lo;ee of tho Board*

Vo*y troly y«rarst

yaarga is* wareae* ChairKan.

Hr* 3«aw. Strong, Governor*Poloral Beatrre 3aak,

tow Tork, H# T*




Authority £ q / 2 . 9 S T

S3

Dsosnfesr 6f 1923.

Bsar Sir*Ths Fsdsrsl Bsssrts 3 card at its ats*tixi& tedsy

sp lin ts* l i m i i Hill** sad tatlia* rot ry»#lf *s • eesaslttss I* iwrsstigsts ths origin #f ths Washington ds*patcrti appwrir^ to ths Ifsw Yetk Joum 1 of O hsiim , w iilf is ts of Dsoosifcsr 4» 1923, sspy #f liiioh is h%rvwl%h tttadb»4» & tiadtrttldBg t>*s isvsstig&tlon ssslgnsA to it , ths oosssittss Is making ths following Idsntioal rs- qnsst s f sash rewfesr o f ths 3o*rd and sach assBifcsr of ths 0|>sn In te l Enrsstiaent Qcssiittss fsr ths Fsdsrsl Hsssrrs Systs* sttsndlng- ths oonfsrenos with ths Boarfl on StaRtey*i/COWOVF sPfc

Plsass a&riss ths soR»ittss i&athsr ys* Jftsossssd or mads sasy st&tsswnt in smrnsst Ion with the prooMpimgs of ths senfsrenos to sny p«ew» othsr than * issnhsr l r ths Board, s nssibsr s f ths %«b Us*lest Isvsstviant Cosisltts* or SB SBplOySS of ths ft*fl*4U

?**y traly awwrH

Osorgs B* «TSKISS'Chsiwjsn.

lr* I. B* Fattsson, sssrstary*%sa larkst Xntsstmsnt Qoeafeittss*

s/s Fsdsnal Bsssrvs Basic*l*w To*fc* 1 * T*



DECLASSIFIED Authority B o /Z ,? £ T f

3 3 3 .

Boaar Sirt

fho Fodoral Kooorra BMrt mt It* «**ti*ig today aj>polntod Mmmwam* *sn&. ant npaolf a* *oommittoo to tnvootigato th® origin of tho 7e0hin|?t©ii9 9 « P « I6 n # p p w r l n g IB vfiO lt*w TOTS: vOwTTwU. Ox vOSTSnOrOO*tmdor into of $oeo»*or 4 , 1923, map? of which Is herewith attached* X» mi*rUfc$B& tho Invoatigation a«olgn«d to It* tho ooraaittoo la waking tho following i^ontioal roquoot of moli n «H r of tho N tH and m il raombor of tho Gpoit Barlwt Ircrostmont Coeaiittoo for tho Fodor&l Ko«or*o 3y*to*i *%t**ftiag tho oonforonoo with tho Board on $tenAay» D«o*frib*r 3*

1'Xoaoo adrlao tho co»Mittoo w&oth*r you itsoaaood or wad* anjr otatomo&t l» connootion with tho prdooodinga of tho ooaforonoo to any poroon otkor than a noa^or of tho Board* a laonshor of ttoo Opon Ifairlnit lirroatjaont; Ooraslttoo or an oaployeo of tho Board*

Tory trstly yotaro*

E # J * Uhalntan*

#

0**# jr* Korrla* fr©Tomorf Fodoral Booorv* %m%I’hiladolphia, Pomia*


Reproduced from the Unclassified I Declassified Holdings of the

3

Pmmab*r 6* *923.

$*«r Sinfi» F*4aral B B « * r 4 at it* «•**$&&

today appointed Maaara* H iltar and aa&lft, m i myaalf a* a ©OKsrdttaa to ijnraafcigate the orlgte of th# n$mdhin&%m. daapatch appearing in the TTaw York Journal of Ooworo*, undor &*%• of EeoeiB'ber 4* 1923, copy of vbfefe Is herewith attached. fit untexliafctag th* imraatigBtioii toit* tin* ecaadtta* i* waking th* following identical ra~ <l*i*at of tMh norther of th* 3o»r4 «a& mmh tnasibar of th* Op«n Itartefft Tmmtw:e&% Ooimltt** for the Federal laaawa Syat*® attending th* oojifaraita* with $fc* Board an JtaAay* j aoaniBax iH

Haas* ad*!** tha aowwittaa Cathay ym ti#* *t*aa*$ or £*&* any statement in eoaneotion with th* pro- oeeaiag* of th* oonf*r*iio* to aay paraoa ©thar than a mauibar of th* Bo«*&f a juessbar of th* Opmn Vmfimt Investment Gjwasittaa or an aapioy** of th* Beard*

T*ry truly youra*

Gaorg* 1* Jamea* Chairman.

Kr* 1* H* Fanoher, Go**araor# Fe&eral Beaarra $»»&#

Cleveland* Ohio*

National Archives

DECLASSIFIEDAuthority bo_ l2 jf5J '


H5icL^siFlED“Authority /2J?S^&


O A

Eooeaftor 6* 192$*

Boar S in

fft* Padaral BeaorroJJoard a t it* M ating today appointed losars* I 'i l lo r and H o lla , sad vgrsolf as a «m*~ m lttm to inrest Igatp tho origH of tit# Wtmhtetgtm dospatoh appearing in tins low Yorlt Joarail of Qon»«roo* tmdor date of SantBteST 4 . 1925J copy of « !ii^ Is herewith attached, la mideriasrlng the investigation assigned to i t , the ooex* s i t too Is tsaldBg the following ide»t ioal request of oaoh wmdmr of the Board and each meaner of th* Op«i Bartost Errrestmemt Gotwdttee for tbs federal Reaerre System attending the oonferenoe with the Board on Monday* Doemribar 8*

Please advise tho oomsltteo whether yon M f sussed or »«de any statement in cameo tio» with tho^ro* oeedimgs of t l* conference to a*qr f<*ffao» other than a wewtoor of tho Board* a mOmmt of tho Open Baftcet tmmmtwmt Comittoo or m employee of tho Board.

Tflojpjf truly yoara#

George E* James, Chairman*

Mr* #• B# ^olKmgal, Oorettior* FadjOY<al « # n m ituAc*

Chicago, HI lac is*



DECLASSIFIED...Authority / 2 ? 5 T

' 7 l / > 3Dear Sir:

The Federal Reserve Board at its meeting today appointed Messrs. Miller^and Hamlin* and myself as a committee to investigate the origin of the Washington despatch appearing in the New York Journal of Commerce, under date of December 4, 1923/ copy of which is herewith attached. In undertaking the investigation assigned to it, the committee is making the following identical request of each member of the Board and each member of the Open Market Investment Committee for the Federal Reserve System attending the conference with the Board on Monday, December 3*

Please advise the committee whether you discussed or made any statement in connection with the proceedings of the conference to any person other than a member of the Board, a member of the Open'Market Investment Committee or an employee of the Board.

. Very truly yours,

George R# James, Chairman




Authority &Q

im s m s at oam ssm cs m cm m m a* i 92g,

Gov. Crissin^er

Mr* Platt Kr. Hamlin^/^

Mr* Killer ^

Hr* JamesMr. Gtamingham!ir* Eddy, SecretaryHr* Winston, Assistant Secretary of the Treasury.Mr* Stewart, Director, Research & Statistics Dir. Gov* Strong

S 'Gov* Harding ^

©or* i*'ancher Gov. Norris y Gov* KoDougal yMr, Mattison, Se&retary-of Gora»itt«a. s



H d eK a SSIFIEDAuthority f &

F o r m N o . 131.

Office Corresponae cef e d e r a l r e s e r v e

BOARDDate f u r i i

Hr. Stewart Subject:.- 4

Hoy ^

fin* Oomitta# m Plmmmt m& 0pm °'47/o>Ea«est Foliar will hoM a In tbs Voteml 1 ^9

a t *0 u « » ) mel Vittel! tie* i t w ill sonsIds* tbs d e ta ils <*f tbs

»*iw j»ta» for stating Hit fwssrrs positions «f wm Icftiyftl Btssnrs ba&tas, m mil m Ut» 0ilb#rtf* i» tt# r o f August Stti with rsgw a to gpli p s ^ m ts by „svsi his letter of Apffrost 3r*l J suggsstlin# * tmrtmln dl ffer«ntiai tha nriU#»ootmt rate fm m w m m M p*pa* and. th* apwi m&m% rata f&r MOwt* m»aspt*Kaes+ tr» &ilfc«*t and !?• $lft»ten h»*s belli bwm iavttsd to otteni this n&aattngr*



DECLASSIFIEDAuthority &Q/Z-95~f

December 6, 1923The Governor appointed Messrs, James, Hamlin and Miller as a

special committee to investigate the origin of the Washington despatch appearing in the December 4th issue of the New York Journal of Commerce, concerning the meeting held by the Board on December 3rd with the Open Market Investment Committee for the Federal Reserve System.




\


o r R i c h m o n d

3 3 3

December 5, 1923.

Federal Reserve Board, Washington, D.C,

Gentlemen:Attention Mr. W. L. Eddy, Secretary,

Receipt is acknowledged of the December 3/giving us confidential information for the use o! our officers and direetor& with reference to purchase of short-time Government securities by the Open Market Investment Committee. We note that details of procedure to be followed will be given us by the Committee.

GJS-CCP



DECLASSIFIED Authority Q J 2 j f 5 J

y 3 3.-

I December 5, 1923Mr, Miller then called attention to an article appearing in the

December 4th issue of the Journal of Commerce, said article being a Washington despatch containing a circumstaneial report of the proceedings of the Board1s conference of December 3rd with the Open Market Investment Committee of the Federal Reserve System; no statement in connection with the meeting having been authorized by the Board.

At this point Governor Strong was invited into the room and discussed with the members of the Board the probable source of the information contained in the article, and the importance of strictly regulating the publication of Federal reserve information.



DECLASSIFIEDAuthority &Q/ 2 75 f

X-3904- pZ 3 3 A-

AETICIE APPEARING IN THE HE!V TOEK JOUBHAL OF COMMERCE Tuesday, December k t 1923-

RESERVE BANKS TO BUY U. S. SEBURITIES

HOLDINGS ARE K)UND TO BE ALMOST AT MINIMUM. /

Open Market Committee Confers With Board - May Obviate the Necessity for a. Change in the Rediscount Bates.

WASHINGTON, Dec. 3 - Renewed purchasing of Government securities in the open market by the Federal Reserve Banks on a considerable scale wa.s expected tonight to result from the meeting of the Federal Reserve Board- with its special committee on open market operations. The Reserve system’s holding of Government securities were found to be almost at a. minimum.

The open maxket committee, which includes in its membership Governor Strong, of the New York Reserve Bank, and Governor Harding, of the Boston Reserve Bank, the former governor of the board, met today with the board and was understood to have gone over the Government security holdings of the various Reserve banks in the light of the probable extent of future purchases under the system1 s uniform open market policy*

MAY OBVIATE RATE CHANGEOpen market operations of the Reserve system are particularly important

in that their effect holds the possibility of producing results which obvia.te a necessity for a change in rediscount rates.

According to the boardfs latest reports, as of November 30, ne entire holdings of Government securities of the twelve reserve banks is only about $gU,0Q0,000, which is very near the low point for these assets, as compared with about $300*000,000 on approximately the same date last yea.r. Moreover, probably as much as $^0,000,000 of the ^.resent holdings of Government securities represent bonds which the banks would be virtually unable to sell except a.t a loss, as bonds taken to secure circulation are included in the total holdings.

Hence the shelves of the Reserve banks are getting bare of marketable Government securities and it is expected that the banks will shortly resume


DECLASSIFTED Authority / 2. C?S ^


\- 2 - x-3904

pu.rcha.sing to replenish their stocks. Purchases probably will be devoted in the main to Treasury certificates of indebtedness.

HOLDINGS OF ACCSPTilNCSS,Holdings of bankers1 acceptances by the Reserve banks aggregate the .re

spectable figure of $229,000,000, as compared with $259,000,000 a. year ago, but sales of these bills on any appreciable scale would probably involve a change in the rate, so tha.t if the Reserve banks are to continue the free use of the uniform market policy it will be necessary to stock up on open Government securities.

Despite the failure of the Federal Reserve Council at its recent conference with the Reserve Board to discuss the rediscount .rate levels, there is a- feeling in some quarters that a. reduction of rates is in order. However, a resumption of purchasing in the open market by the reserve banks would result in more money being put on the market, or in other words, the extension of credit facilities by the reserve banks in the nature of an equivalent to a reduction in rates.




Authority

Daoanbsr 5, 1923

Dear Governor Strong i

You are advleed that the Federal Heaerve Board a t I ts raaet~ tng today oonaldored the report of your Comal tte« and adopted the following raaolutlonat

"WHEREAS, The Open Market Investment Cownlttee of the Federal Reserve Syaten (Governor* Strong, Harding, MoDougal» Fanohor and Korria) hag reported to the Board th a t I t la expedient a t the present time that the Federal reserve banka be .glvan permission to asaun* a poelti m toward tha money vmrk»t by the purchase of a suitable volvom of Oovenraent eeouritles of abort ttrae r~«turitlee # provided suoh purohasee oan be mde without disturbing tha conditions of the money market or of tha etarkat for Government aeourltiaaf

*»0W# THi&i»Jfc8t BE I t RiiSOLVSD, That the Federal Reserve Board deolarea I ta e lf In favor of the purohase of a H alted volume of ahort term Ooveroaent sem iritiee a t th la tine* I t being understood tha t the Board reserves the right to discontinue mirohases and to raqulr© the sale of any of the saourlties purehased in purauanee of th la raeolutlon a t any tine i t may dean expedient t and

*B& IT FURTHSB KKSOLTBD, That topi** of tha«a rMO- lutlons be transmitted to the Chairman of the Open Market Jnreatnsent Coanittee of the Federal Reserve System and to tha Governors of a l l Federal reserve banks**

8y direction of tha Federal Reserve Board#

Respectfully,

Walter L. £ddyt Secretary

Kr* Bonj. Strong* Chainoan,0pen Ikrloet Investaent Cossmlttee

of the Federal Boserva Systen*




Authority b o / 2J 7 5 T

3 5 3.

frooomfroi* 3- 1923

W Z U L

INw dammor TTorrUi

for tho oonfldontial of yoaroolf ana tho mribers afjrwr beaii of fm aro adrlood of tha following rooelutioaa&optad today by tho T H in l Rooorro Bomdi

"WKSEBAS, Tho 0*>oa IftVfcil Smttt&aai Qoanlttoo of tho Fodorol Boa«i"ft Syoto* (Gororaors Strong, Hfcrdlng,KoEoogal, fmato** mod Yarrial hao roportod to tho Board that I t it oa odloat at tho praaaat time that tha Fodoral r n « m banks bo glvm pormUoion to ftMRffi* * poattioa tOOarft tha IHKiOy JBOIrtEOt I®? tha pflSBNfltiMBSS Of ft «rai table imtmm of &wroram«nt aaosrttiaa of ohort tis* natturitioo, proridod *a*h rurohooo* m i bo wgA% vlthoot disturbing tho oon&ltlon* of tlio meaty w*ks% or of tha JBftJ?%20t f C^OrOTtSloat tOtHttr I t iOO|i

”w m 9 w ® t ® , 38 if hesomfkd* %hat tha ?odora£ loto**a Board doolarot itoolf la fe to r of tha jmrahaoo of ft limitod rclmm of thort to*» bwmmmt ooojaritieo at tfcta time, i t bo lag txadorttood that tha Board rooorrot tho ri#*t to a* a© outlaw purehaaot and to raqplra tlta oftlo of asy of tho aoearftioa pwrohoood ia 'yftronwfcoo of th la rooolutioa ftt aay tlmo I t *fty dot* «%o&imtf and

"IB 1$ iro ara XRBOOm, that ©oplot of Hum roao- la titat bo tfoaMMlttot to tho % iie c i of tlo Opm Sajrtwt fcrroafeaoat Gonmittoo of tho Podaral Booorro Syatow aaft to tho Sotoraort of a l l Fodoral m tr r i btalct**

Jtell dotall* of tho pfooadoro to bo follmrod bp tho Opon HaHsot £mata>agt Oomtttoo aad by tho Fodoral rooorro btafct w ill bo aoawaai* aatod to yoa bp tho 0haiia*a of tho Oownlttoo*

% diroatioa of tho flodoral Ho«otta Board*

Tory tm ly yoturt.

Waltor I.. Sddy, Hr* 9oo* W» titaravaar* Soorotary#**€lw3nW, JROBOTtOPhlladolphla* Fa.




Authority & £L[2JtSJ

Dooeabor 3t X*23

o m v w m z u L

Boar aororaor Ft&dwrt

For th* ooafid*ntiaX Information of ytmrsoXf and tho mB)Mn of ytwjr board of dlrootora, jm% aro advlood of tho following resolution adopted today by tho FederaX Besom Boardi

"OTSRMS, VHe Cpm Kaifcat fimttnsmt Cao&ltt** of th* Federal Beserve Syotaa (&o?eraors Strong, Hard inft I’oDoogel* Fanoher aai Serrlal has reported to the Soar* that It to expedient at tho present tiiae that tho Federal reserve baafca bo given permission to aaaua* 0 position toward tho B<»*y »*ifc*t bar tho purchase of a suitable voltano of Government securities of short tin* Bs&turlties, provided amok purohasef oaa bo sado without disturbing tho conditions of tho reoney market or of tho »a*fe*t for Sotemraoat securitise ,

mssaagw^ m a BB30LOT), fhat tho Federal Beserfs Board d^flaree itaeXf Is favor of tho purchase of a X2mltod to& m of ahort tom OoveraKoat securities at tM s time* I t being understood that tho Board reserve* tho right to discontinue purchases and to roqulro tlio sale of any of tho aeauritlea purchased in purvuanoe of th la roaoXutloo. a t aay tiiao I t m y deon o^podlo&tf and

"BE » H7B3!HER jmOLVBD, Shat copies of thoso resolution* bo transmitted to tha Chaiman of tho C|>en Kaxtnl lares teetat Cownlttee of tho Federal Besejrre Syaten and to tha Governors of aXX FedoraX reserve

FulX dotails of tho preoedore to bo followed by tho open KaitottSare&tjteent Cannittee and by tlio FedoraX reserve banks wilX bo aoamml oatod to yoa by tho Ohalxnan of tho Gsesaitteo#

ify diroot ion of tlio FedoraX Beserve Board*

Tory truly yours,

WaXtor U Sddyf Mr. Mm B. Fancher, ^ovor&or, Seoretary.

Federal Beeervo Bank,Cleveland, Ohio*


5 e ^ a?sifIeF “Authority £ tf /2 ~ 9 iT f


3, 19383

q « fciw,BJL

Dmy Ctovaraor Saay«

For tha oonfldantlal information of yooraolf and tha aambara of yoor board of dlrootoro, 70a « • adTlaad of tho following rtaoltttlon adoptad todagMQr tho fodaral Raaarra Board i

"WHTOSAS, *ha Cfcan Sftxtot hrraatmant Ooamittaa of tho M oral Koaarra SyataR (Ooramors Strong* Hhrdtnft HoToneal* Tanohar and JTorria) h*a raportad to tha Board that it ia aapadiaat at tha praaont tima that tha Fadaral raaarva hanfaR ba glram pormluilen to aaanaa a politic* toward tha monay laajtoat by tha rmrebaao of a suitabla volma of fcorarwaaat soouritlaa of abort ttaa rmturitio*, pzwidod anah pnrQh&sas o*n ha laada wlthoat disturbing tha o<mditl<ma of tha monay market or of tha raarfcat for 3evara»s«nt aooaritioat

ffHSRHPORJS, BS 13? R BOLVKS), Thfct tha F*dar*l Raaarra Board doolaraa itaa lf in foror of tha pnrohnaa of a 1 ini tod rolmna of ahort tarn Sovemwmt so<mx*ltiea at thiatiw a, it bo tag tmdaratood that tha aoarff raaarraa tha Ttjjfat to disoatitima xmrehcaaa and to raqoira tha oala of aay af tha aaoorltiaa pwrchaaad in pconmaoaa af thia raaolution at tmy tiiaa it ri*y daae? aaqpedlant, and

WHB H? FHRTHSB RUSOOTT), Shat eopica of thaaa raao- Inttaaa ba tramanittad to tha Chaim** of tha Qpon Harkat Hrrroatiamt C await taa of tha flfcdaral Raaarra 3y*t«n aaA to tha Governors of a l l ?®darml raaarra banka**

Foil dataila of tha prooodnro ta ha followad by tha Cfcan XarkatInvestment OaEmitttta and by tha Sedoral rasarra banka w ill ha acaarcml- eatad ta yon by tha Chainnm of tha Couwttt*ia*

ly direction af tha Podaral Raaarra Board#

Tory trnly yonra.

Waltar U 8ddy# Ifrs Goorga J* 5o*yy Ocrramw* Saaratary#

Fodaral Raaarra Bank*Blehmond, Virginia*



DECLASSIFIEDAuthority b() / 2 ? S T

J

Boooiafcos* 1925

m W M t t

Boar Oororaor WoXXhcmi

For th* oonfirtantial Imfonafilian of yourself cad tho fiwnfcora of you* hoard of 41 m otors, you ftro advisod of the following roaolntiosi adop ts today hy tho Fedor*! loaonro Sonrd*

"WHEatBA8t tho (**& Wmtko* Iwroatiaottt Consnittoo of th* Fodoral Booorro Syatorn (Govarncr* Strong, M&Hing*J?oPaagaX# Tanoher asad forrio! fcaa reported to tho Board th»t I t fe 03$*odlovtt ot the prooent tlto that tho Fodorm* rooorvo henica ho giro* per&i*«l(ra to mtmrnm ft position toward tho uonoy mffesot hy tho ptirohSBO of ft auitahlo volwso of Oovonwont aeetiritiei of ohort ti*o BSturttloo# provided ottoh jmrohftsoo oe* ho s&do without disturbing th® condition* of tho Bio&*y m£*mt or of tho market for ^ o rw ij i t •oaurit i*at

"jrer, thbkbfoks, m b? m m u m § fhst tho Foaorti Rooorro Boerdl doelare* itoolf in ffevor of tho porohaso of o ite lto d volwio of ohort tors Scvonmont ooeuritio* ftt thi* tisof It he lag mdoroteod th&t tho Boarfl rooerro* tho rigjbt to <?lacoiitimti« jmrohftaoa sad to roâlro tho «ftlo of fc»y of tho oooiuritloo purohftaod I* purosftnoo of thia roaotutlom at %im It »&y deo&t oaôdio&t, a»d

««b i f mmmm. $hat oîoa of thooo re»o*tatloaa ho transmitted to tho cautim» of tho %o& iier&ot &cro«tn«Ht doaalttot of tho Fodorsl Booorro 8yat«s oaid to tho SoTtniort of o il Fodoral rosorvo hm*iks**

Fell dot a ils of tho ptoootoo to ho follovod tgr tho Cfeom n m t fcwroatesoat Goaazdttoo and ly tho Fodorol ?oao#vo hartfc* w ill ho oatod to y<m by tho Ghaiyjaaai of tho CoKtaittoo*

ly dirootion of tho Fodorol Boaorro BoarS#

Tory traly yous***

fftltor U Bddy* I r . JU S| tollhot% §orrom«r# Soorotary.

Fadoral Boaorro Beak*Atlanta, Georgia*



“d e c l a s s i f i e dAuthority &Q /2 ? 5 ~ f

«Cw.3 ■ A -

\

Docarabor 3, 1923.

Q 9M m m M k

Dear Governor S&sDougslt

For the confidential info mat ion of yourself and the members of your board of directors, you are advised of tho following resolution adept od today by the Federal Beserve Board*

The Opm MajScet Investment Conmitt oe of the Federal Reserve System (Governors Strong, Harding,2fcDougal# Faacher and Borris) has reported to the Board that it is expedient at the present tine that the Federal reserve banks be given p emission to assume a position tosmrd the money market by the purchase of a suitable volume of Government securities of short time raaturit ies, provided such purchases can be made without distui'bing the conditions of the money raarketfor of the maxfcet for Government securities*

”H0% m BBFOBis, b:: IT nJSOLVEl), That the Federal Reserve Board declares itse lf in favor of the purchase of a limited volume of short term Government securities at this time, it being understood that tho Board reserves the rifjit to discontinue purchases and to require the sale of any of the securities purchased in pursuance of this resolution at any tirao it my deem eocpedient, and

'’BE IT m im m K&OLVZD, That copies of these resolutions be transmitted to the Chairman of the Open Ifcricet Investment Comitt oe of the Federal Reserve System said to the Governors of a ll Federal reserve banks*"

Full details of the procedure to be followed by the Open Market Invest moat Conmitteo and by the Federal reserve banks will be commicatod to you by the Chairman of the Comittee#

By direction of the Federal Heserve Board*

Very truly yours,

Mr* J* B* ifcDousal, Governor*Federal Reserve Bank, a lte r L# Eddy,

Ohicago, Ills# o oe rotary*



D EC L A SS IFIEDA u t h o r i t y < T '( ; / 2

Deocraiber 3, 1923*

m m m u k

Boar Governor B%gs§

Por the confiArntial informtion of jourself ©nd the members of your board of directors, you aro advised of tho following resolution adopted today by tho Podoml Reserve Boardi

"WWM&9 2he Open Uaxket Investment Comitt 00 of tho Fodaral Beworvo System (Oovoricrs Strohg, Bardins,BsDougsl, Faaohor and Horris} has reported to tho Board that it is QKpodionfe at tho p ro s it timo that the Federal resorv® hanks ho given permission to assume) a position toward the monoy maikot by tho psrchaso of a suitable volumes of Government securities of short tims m turlties# provided such purchases car. be nade without disturbing tho conditions of tho raonoy aarkot or of tho market for Oovorrmrnt securities*

*aowf mBBSfOKit m it m&Qirm§ ou* tho fedorai Reserve Bo&rft declares itso lf in favor of tho purchase of a limitod volume of Short tom Govornmont securities at this tlao, it being understood that the Board reserves tho ri^ it to diseontime purchases and to rocpiro tho sale of any of the securities purchased in pursuance of this resolution at any t i m i t my deem mp&Xl&rt, and

"BE If FUKEH3R fhat copies of these resolutions be transmitted to the Chairnan of tho Open U&rkst Investlasnt Consult toe of tho Fodaral Reserve System and to tho Governors of a ll Fodoral reserve banks*"

Stall dteta'iUift of tho procedure to bo fbllowod by the Open Market Invest isont Cousaitteo and by the federal reserve banks will bo conimmi- oatod to you byWm Cftaiman of tho Cowiittee,

By direction of tho Foderal Bosorvo Board*

?o*7 tiu ly yours.

Mr* J>* c* Biggs, Governor, Federal Reserve Bank,

St* Louis, ISO*

Walter I** iMdyt Soorotary*



DECLASSIFIED Authority & (j / Z 7 5 ~ f

I I

3 3 3 .

Dear Governor Tcrang*

For the confident ial information of yourself and the members of ycmr hoard of directors, you are advised of the following resolution adopted today by the Federal Heserve Board*

rfl£38KA3, 2he Open 2texfc«t Investnienfc C await tee of the Federal Reserve System {Sovemors Strong, Harding,JicDaagal, toaobBT and Borris) has reported to the Board that i t is expedient at the present time that the Federal reserve banks be given permission to asaune a position tomrd th money laarlset by the purchase of a suitable volura of Government seouritios of short time imturities, provided such purchases can be made without disturbing the conditions of the money isarkefc or of the imrket for Government securit ios,

"HOW, 3SS8SP0BS, BIS 12 BBSOMBU, fhat the Federsl Besarve Board declares itse lf in favor of the purchase of a 1 halted volume of short term Govemiamt securities at th is time, it being understood that the Board reserves the rt$ it to discontinue purchases and to require the sale of any of the seourit ies purchased in pursuance of th is resolution at any time- i t may deem expedient, and

«m If mtmmi iesolthP, eiat copies of these resolutions he transmitted to the dmixnmn of the Open Ifciteet Investmmt Coiamittee of the Federal Reserve System and to the Governor a of a l l federal reserve banks*"

fu ll details of the procedure to be followed by the Open Harket Investment Cosmittee and by the Federal reserve banks will be conrami- oated to you by the Qhaiimn of the Ooiaaitte©*

By direction of the Federal Reserve Board,

¥e*y truly jours,

Mr* H* A# Toun&, Governor, Federal Heserve Bank,

Minneapolis, Minn*

Walter L« Mdy, Secretary.


,uv=u " um uie unclassified / Declassified Holdings of the National Archives


Authority &Q/2J7£Tf

Decerrfcer 3f 19£3

Dear Oovov m r Baileyi

For the confidential in format ian of yourself and the members of your board of directors, you are advised of the following resolution adopted ttoday by the Federal Reserve Boards

"WffiSHSAS, She Open market Investment Conmittee o f the Federal Reserve System (Governors Strong, Harding,McDougal, Fanchor and Sorris) has reported to the Board that It is expedient at the present time that the Federal reserve bai&s be jivon permission to assume a position toward the money market by the purchase of a suitable volume Of Government securities of short tinw maturities, provided such purchases can be made v&thout disturbing the conditions of the zaoney market or of the market for Government securities*

"SOw, TIE3RKFQH3* Bui 12 1C30LV23), That the Federal Reserve Board declares itself in favor of the purchase of a limited voltape of short term Government securities at this time, it being understood that the Board reserves the ri#t to discontinue purchases and to require the sale of any of the securities purchased in pursuance of this resolution at any time it m y deem expedientf and

"BS 13? FUHZH3R SSS0I»V13Df 2hat ooples of these reso~ lutlons be transmitted to the Cbairraan of the Open l&xket Investment Conmittee of the Federal Reserve System and to the Governora ttftalBtJ’odoral reserve b&zfts#”

Full details of the procedure to be followed by the Open Market Investment Goaaalttee and by the Federal reserve banks will be cojaraml- cated to you by the Chairman of the Committee*

By direction of the Federal Reserve Board* \Very truly yoursv

Mr0 W, J* Bailey, Governor, Federal Reserve Bank*

Kansas Clty«r lto«

r,alter L« I3ddyf Secretary*



DECLASSIFIED Authority & n /Z -9 5 ~ f

Doeombor 3f 19£3*

Baa? Governor McKinney**

For the c confidential information of yoursolf and the moabmi of your board of directors* you are advised of the following resolution adopted today by the Federal Reserve Boardi

*WSti&3t *Jhe Open Market Imrestineat Ooonittoe of the Federal Beserve System (CJaverMors Strong* Harding,MoBocigal, Faneher and Horris} has reported to the Board that it is expedient at the present tiiaa that the federal reserve banks be siven permission to assuas a position toward the money aailcet by the purchase of a suitable volume of Comment seourit ies of short time Maturities, provided such purchases can be imdo without dlsfcis&lqg the cadditions of tho money market or of the a&ilcefc for Savarnneeat seourities*

«sow# m m w a m , m i t m m m m 9 mat the FederalReserve Board declares itse lf in favor of the purchase of a limited volume of short tens Government securities at this tine* It being understood that the Board reserves the rt&xt to discontinue purchases and to re quire the sale of any of the securities purchased in pursuance of this resolution at any time it may deem expedient* and

”B3 II? wmmm IESOLTSB* Shat copies of these reso^ lutions be transmitted to the Chairman of the Open Ziaifeefc Investment Oaaaittee of tho Federal Reserve System and to the Governors of a ll Federal reserve bante*M

Full details of the procedure to be Allowed by the Open Ifexket Investment Coniaittee and by the Federal reserve banks w i l l be contami* cated to you by the Chaiman of the Gowaittee*

By direction of the federal Beserve Board*

Very truly yours*

Mr* B* A* AfcKinney, Governor, Federal Hesesrve Bank*

Dallas* ?<&as*

Valter L* liddy, Secretary*



d e c E ^ s if ie d

Authority S(J /2J75^f

3 33.

EecOKfrer 3f 1923.

s s K im m k

Dear Governor Calkins i

For tho confidential information of yooraolf and tho raonfcors of your board of directors, yoo. are advisod of the fallowing resolution adopted today hy tho Federal Reserve Boa id?

nvHHEMSt Th& Open Haricot Investment Coniaittee of tha Federal Heaorve Sy»t«a (Governors Strong, Harding,HsDoogal, Faachor and Horris) has reported to tho Board that it is expedient at tho present time that tho Fodoral reserve batiks ho given p omission to assume a position toward tho naoaey maifeet by tho purchase of a suitable vote*© of Government securities of short tine is&turities, provided such purchases can he made without distuxtoine the oonditions of the laoney njarket or of the mascot for Govermaent securities*

nrni9 nmmmm* BS rn IESOJ.VKD* i?hat the Federal Eoaarvo Board declares itse lf in favor of the purchase of a limited volume of ahort tens Ckroerranent securities at this tis» f it being understood that the Board reserves the ri^ht to discontinue purchases and to require the sale of any of the securities purchased in gmrsuenee of this resolution at any t lm:; i t isay deem expedient, and

nm IT KHHJHSR msaZi¥BB3># 2h&t copies of these reso- lut ions he transmitted to the Chaizmn of the Open i&rket Investment Comaittee of the Federal Reserve System and to the Governors of a ll Federal reserve banks***

Full details of the procedure to he followed by the Up an Baifeet Investment Conralttee and by tho Federal reservo hanks will he comaani- eated to you hy the Chairman of the Committee*

By direction of the Federal leserve Board#

Very t ruly yourst

Hr* J* U. Calkins, Governor, Federal Beserve Bank,

San Franc isoo9 Oal*m iter L, Mfy§

3earetaxy#



DECLASSIFIED Authority & n /2 j? 5 ~ f

3, 1923f 7 7

/ Z- ""Consideration was given to the report submitted by the Open Market

Investment Committee of the Federal Reserve System at the November conference of Governors and to the statements made by the members of the Committee at a conference with the Board on the morning of this date. After a discussion of the Committee *s report and of the policy outlined therein, the foHoYring resolution was unanimously adopted:

"WHEREAS, The Open Market Investment Committee of the Federal Reserve System (Governors Strong, Harding, McDougal, Fancher and Norris) has reported to the Board that it is expedient at the present time that the Federal reserve banks be given permission to assume a position toward the money market by the purchase of a suitable volume of Government securities of short time maturities, provided such purchases can be made without distrubing the conditions of t-h Tnnnp.y market or of the market for Government securities,

"NOW, THEREFORE, BE IT RESOLVED, That the Federal Reserve Board declares itself in favor of the purchase of a limited volume of short term Government securities at this time, it / being understood that the Board reserves the right to discon- j tinue purchases and to require the sale of any of th>* aarujngj- ties purchased- in pursuance of this resolution,,^ nny tlmo it j mayjdeem expedient, and j

"BE IT FURTHER RESOLVED, That copies of these resolutions/ be transmitted to the Chairman of the Open Market Investment Committee of the Federal Reserve System and to the Governors j of all Federal reserve banks." j

J



DECLASSIFIED Authority &() / Z C7E> &

FaocjcB-Jao. 131. \Office Correspoi eTo____ , Mr.*.. JMy----- ---------


Mr* Smead

(K#DWt •©MS* HUt— Ii /a|e Ntrvwrnber 21, 1923.

Subject:- Ghaagos--i i fffrdefcaiUBftservJ .Bank

.holdings of U n i

Attached hereto are twelve^copies of stencil St. 3792, showing weekly changes in Federal reserve bank holdings of Government securities from January 3 to October 31, together with weekly purchases and sales subdivided so as to show transactions with the United States Treasury, the Alien Property Custodian,and all other transactions exclusive of transactions between Federal reserve banks. From an examination of the attached table you will note that the redemptions by the Treasury and sales to the Treasury between January 3 and October 31 exceeded purchases from the Treasury by $224,539,000, also that holdings in investment accounts of the banks exclusive of one-day certificates held to cover Treasury overdrafts and securities held under repurchase agreement, declined #247,666,000 during the same period. As sales to the Alien Property Custodian and to the Federal Land Banks exceeded purchases from the Alien Property Custodian by $52,265,000, it is evident that in their strictly open market operations the purchases of the Federal reserve banks exceeded their sales by $29,138,000, as will be seen from the following table:

•Transactions with — Pure ha se s

Sales or Eedemotions

NetDecrease

U. S. Treasurer {exclusive oftemporary 1-day certificates).......Alien Property Custodian............

All other (open market) transactions.

. $ 2,443,000

. 10,000,000

. 170.314.000

$226,982,000 56,265,000 6,000,000

141.176.000 .

$224,539,00046,265,0006,000,000

*29.138.000.#182.757.000 $430,423,000 $247,666,000

U. S. securities held in investment account (exclusive of 1-day certificates and securities held under repurchase agreement) —

January 3, 1923..................... .October 31, 1923........... .........,

#325,247,00077.581.000 J M l .666.000

U. S. securities held under repurchase agreement —

January 3, 1923.................. .October 31, 1923.................. .

$ 43,307,000 14.256.000 $ 29.051.000

*Het increase.


t O N F I D S NFor use Reserve

of F ederal Board only

CHANGES IN FEDERAL RESERVE RANK HOLDINGS OF RITIT!BY MEEKS FROM JANUARY 3, TO OCT01!

STATES GOVERNMENT SECURIT]31, 1923. S t .3792

Week erring -

Holdings at end of week - Purchases (exclusive of those under repurchase agreement)

Sales (exclusive of those under repurchase agreement)

TotalUnder repurchase agreement

In im ac.cc

One-day certificates

res teen tJUltAllother

From U. S.

Treasurer*

FromAlien

PropertyCustodian

Allother

purchases(a)

Totalpurchases

To U.S. Treasurer including redemptions “before

maturity

Redemptions by U. s. Treasurer

atmaturity*

ToAlien

PropertyCustodian

All other sale s (a)

Totalsales

•* , 3 456,55^ >+3,307 88,000 325,24710 508,176 44,679 131,500 331,997 - - 14-, 64217 412,432 12 ,45 1 73,000 326,981 700 - 9,59924 352,819 34,685 - 3 12 ,134 113 - 21,18031 3 53 , 735 26,387 - 327,348 - - 10,938

Feb. 7 353,124 22,945 _ 330,179 2 10 ,uOO 14,35114 353,523 24,042 - 329,481 - - 2,36721 354,034 22,550 - 331,484 - - 4,53428 363,074 28,062 - 335,012 - - 3,912

Mar, 7 344,887 10,722 _ 334,165 _ 7,42414 3^4,713 10,676 - 33^,037 - - 71821 291,911 13,878 - 278,033 - - 2,00128 249,409 23,535 - 225,874 - - 2,645

1 . 4 239,149 16,306 _ 222,843 _ _ 35911 238,154 15,^05 - 222,749 - - 47618 238,007 16,951 - 221,056 - - 1 ,2 0 125 193,810 9,422 - 184,388 - - 685

May 2 184,772 10,762 _ 174,010 _ 1,8299 185,814 10,481 - 175,333 — - 2,742

16 188,889 14,453 - 174,436 432 — 12,07423 206,959 31,671 5,000 170,286 293 - 74430 189,288 19,250 - 170,038 1 - 2 ,132

June 6 lfg ,T 5 i 23,668 _, 159,083 11,58613 158,100 19,373 - 138,727 2 - 11,33*+2027

12 1,52913^976 42 , 9,36 -

31,01342,040

21 —m

14*64210,29921,29310,93224,3532,3674,531+3,912

7, *+24 713

2,001 2 , 61*5

359*+76

1,2016S5

1,8292,742

12,5061,0372,133

11,58611,3362,59S1 , 491.

3 ,it>0

2,000250

46,784

34,024

11,850

10,0009,780

17,488

57,2*4-17,500

#6,000 10,000

15,000

1,000

5,000

7,893 9,315

16,9

2 ,3 1 1 23,588

1,724

6,5213,0651 ,5 3 1

383

1 ,2 7 1595766518

3,392569

2,8943,330

12,2061,4191,5535,1872,382

21 $ 16’^

7.893 15,31530,141l,?24

21 ,5 2 13,0652,531

383

8,271845

58,00754,802

3,392569

2.894 37,354

12,2061,419

13,4035,1872,382

22,53831,691

> c £ o<!* 2^ MIrvp]

>!to

N S2 >0 s

t§

Reproduced

from the

Unclassified

I Declassified

Holdings

of the N

ational Archives


C 0 N ? I D E K X ,L A. For use of Fed3r_.1l Reserve Board only

CHANGES IN FEDERAL' RESERVE BANK HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES, BY WEEKS FROM JANUARY 3 TO OCTOBER 31, 1923.

St,3792

Weekending-

Holdings at end of week - Purchases (exclusive of those under repurchase agreement)

Sales (exclusive of those under repurchase agreement)

TotalUnder repurchase agreement

In investment account From

U. S.Treasurer*

FromAlien

PropertyCustodian

... ....

Allother

purchases(a)

Totalpurchases

To U, S,Treasurer including redemptions before maturi t.y

Redemptions by U. S.Treasurer

atmaturi ty*

ToAlien

PropertyCustodian

All 0 ther sales (a)

TotalsalesOne-day

certificates

Allother

/ v 4 94,701 16,899 - 77,802 - 2 ,2 15 2,215 13,974 - — 2,479 16,45311 101,23S 23 ,4 15 77,823 - - 336 336 - - - 316 316IS 97,955 21,S4l - 76,il1+ - - 652 652 1,500 - - s6o 2,36025 96,284 19,863 - 76,421 - - 1,470 1,470 520 - - 643 1 , 16 3

Aug, 1 93,793 16,290 _ 77,503 M 2,063 2,063 575 — m 4o6 981S 90,206 -14,302 - 75,304 - - SOI SOI 2,129 - - 272 2,40115 S9»s4i 13,925 — 75,916 - - 118 118 - - - 106 10622 84,759 1 2 , 12 s 72,631 - 746 746 3,500 - - 531 4,03123 93,530 20,64l - 72,889 “ l>375 1,375 330 - — 787 1,117

Sept, 5 98,772 26,093 72,679 15 — 1,269 1,284 - - 672 823 1,49512 99,857 26,189 - 73,668 - - 1,719 1,719 - - 5 725 730\9 92,589 19,676 - 72,913 864 - 964 1,828 15 268 - 2,300 2,58326 91,885 IS,485 - 73,400 - 1 }S3S 1,838 25 - 1,000 326 1,351

C 3 95)1^2 22,290 72,852 — — 400 400 750 - — 198 94810 91,883 l4 ,i6 4 - 77,719 - - 5,304 5,304 - - ^37 437IT 94,04l 19,814 - 74,227 - mi 830 830 1,018 - 3,304 4,32224 88,193 13.757 - 7^,436 - - 536 536 - - - 327 32731 91,837 14,256 - 77,581 - - 4,137 4,137 - - - 993 993

TOTAL 2,443 10,000 170,314 182,757 159,662 67,320 (b) 62,265 14 1 , 176 430,423

> e &

I ' SIY ' Q

[CZ3Gfl I1ST

N>

5

FEDERAL RESERVE EOARDDIVISION OF BANK OPERATIONS

NOVEMBER 21, 1923.

W,

♦Exclusive of temporary 1-day certificates to cover overdraft in Government account, $Sold to Federal Land Banks,

(a)Exelusive of transactions between Federal Reserve Banks,(b)Includes $6,000,000 sold to Federal Land banks,

Reproduced

from the

Unclassified

I Declassified

Holdings

of the

National A

rchives



DECLASSIFIED Authority &Q fZ -IE T f

* }

AGGBPWmSS SOLD FROM 0M PORTFOLIO BY OKS FEDERAL B33SBRVE BASES M JAiTUAHY 1 20 OCTOBER 24, 1923.

Week: ending - 1923 J. . . ___________________________________

To tal.

Philadelphia'. . . . . . . .

Atlanta Chicago j Dallas

Jan. 3 (3 days)10 582 562 - 20 -

17 610 600 — 10 _

24 459 459 -

31 364 259 - 105 —

Feb. 7 612 587 _ 2514 591 591 — -

21 216 186 25 5 —

28 461 461 - —

Mar. 7 310 290 20 - -

14 470 4-70 . - - -

21 196 196 _ - —

28 205 175 30 *>

Apr. 4 55 55 - - _

11 830 820 - - -1018 200 200 - _ *.

25 391 341 - 25 25May 2 78 78 - - -

9 255 255 - -

16 229 219 MU 1023 40 40 - —

30 345 345 - —

June 6 480 480 « - ~

13 235 185 - 50 -

20 110 110 - -

27 279 279 - -

July 4 - - - - -

11 368 208 - 160 -

18 371 231 - 140 -

25 240 90 _ 150 -

Aug. 1 265 265 - - -

8 239 239 - - V *"

15 201 201 - _ -

22 366 366 - - -

29 547 547 - _ -

Sept. 5 143 143 - -

12 118 118 - - - ’19 235 100 - 15 12026 459 293 - - 166

Oct. 3 365 301 mm _ 6410 487 391 - « 9617 622 425 - 19724 593 353 5 ____235

TOTAL 14,222 12,514 50 735 923



d e cl as s i f i e d

Authority & Q / Z C? S <T

A.OG3PSAHGI2iS SOU) moil OWN i OH5PFOLIO BY 2K3 F::mL BAHXS m i JaNUAHT 1 70 QCT03 R 24f 1923.

Week ending - 1923 Total----1----- ------- --

| Phi l&delphla‘T ----------

1 Atlant*\

"1--- ---r~

! 0110860 i. , r . ... r . . (l , , . i,. n

alias

Jan. 3 {3 days) mm mm_

10 582 562 m 20 *1? 610 600 « 10 «.24 459 459 mm

31 364 259 ~ 105 m

Feb. 7 1 612 587 - 25 mm

14 591 591 mm - -21 216 186 25 5 -28 461 461 * mm -

Mar. 7 310 290 20 - -14 470 470 mm -21 196 196 mm mm

28 205 175 - 30 mm

Apr. 4 55 55 - mm mm

11 830 820 - mm -1018 200 200 - mm mm

26 391 341 * P H £5'.lay 2 78 78 m mm mm

9 255 255 mm mm mm

16 229 219 mm wm 1023 40 40 fNfr mm ■»30 545 345 • m •

JUne 6 480 480 • - mm

13 235 185 * 50 *20 110 110 mm mm •27 279 279 mm •

JUly 4 • - mm •- -11 368 £08 160 mm

18 371 231 - 140 -

23 240 90 - 150 -Aug* 1 265 265 • • -

8 239 239 mm • , -15 201 201 - - -22 366 366 mm - -29 547 647 m - -

30pt* 5 143 143 • -12 118 118 - mm -19 22% 100 - 15 12026 459 293 • - 166

Oct. 3 365 301 - - 6410 487 ML - 9617 622 425 • mm 19724 593 353 5 m** 235

TOTAL 14f222 12,614 50 735 923



declassifiedAuthority &£) / 2

n* a* asaiiv*. § : i m m23S?Wr: OS J&CH n . 7 SHAS'SfcW? XAB: I>UHIUr 1923*

M u thomKmria ofu

Amount held (— 5 ffeetely oharreeInoreaa* aftgMfe

dollars)

Amount held.onptancea

,-ogig <fluwroInoreaeo I eoroaa«

J&a* 3 456t554 1,229 255*18£ 8*889 -

10 500,176 51*622 mm 225,760 - 29*42217 41$ ,432 ~ 95*744 201*336 mm 24*42524 35:: *019 - 59*613 204*547 3*212 «•SI 353,735 916 mm 188*566 • 15*981

Feb* 7 353*124 611 184*945 - 3*62114 353*523 399 - 184*476 - 46921 354*034 511 - 182*353 mm 2,12328 363*074 9*040 mm 207*678 25*325 «»

Star* 7 344*887 mm 18*187 218*886 11*208 mm

14 344*710 - 174 225*416 6*530 -21 291*911 mm 52*802 237*965 12*549 -

28 249*409 - 42*502 254*251 16*286 •

Apr* 4 239*149 - 10*260 209*879 5*628 •

11 238*164 - 995 274*389 14*510 -

18 230*007 «• 147 277*447 3*058 -

25 193*810 - 44*197 274*041 • 3*406Hay 2 • 184*772 - 9*038 275*489 1*388 •

9 185*814 1*042 ■ mm 266*992 - 8,43716 188*889 3*075 281*609 14*617 •23 206*959 18*070 - 270*850 mm 10,75929 189*288 mm i7*$m 257*818 13,032Juno 6 182*781 mm 6*r>3? 248*234 - 9,584IS 158*100 - 24*651 218*618 mm 29,61620 121*529 mm 36*571 205*716 - 1. ,90227 134*976 mm £04*225 mm 1,491

JUly 3 94*701 - 40*275 198*912 m . 5,513U 101*238 6*537 - 186*284 - 11,62818 97*955 mm 3*283 183*121 - 3,16325 96*284 mm 1*671 176*864 «» 3*257

AUg* 1 93*793 - ^*491 182*630 5*766 •8 90,206 • 3*587 177*409 - 5,22115 89*841 mm 365 173*189 <M> 4,22022 84*759 - 5*082 176*610 3*421 -

29 93*590 8*771 • 173*485 mm 3*125$€pt» 5 98*772 5*242 mm 174*563 1*078 -

12 99*857 1*085 • 179*313 4*750 -19 92*589 - 7*268 171*044 «• 8,26926 91*885 - 704 172,124 1*080 . .

Oott 3 95*142 3*257 - 172*902 778 mm

10 91*883 mm 3*259 182*407 9*505 -

17 94*041 2*158 mm 190*518 8*111 mm

24 88*193 - 5*848 179*747 mm 10,771



DECLASSIFIEDAuthority /2 C?S

4$ ■ yi ri-. S

11Open iferket Xnvoetaent Ceanittee for in* FOdera 1 R«Mnr« £ystea

Mevoaber l i , 1923

Wr. Oeorgo 1 . Morris,Governor, federal Reserve lank of Philadelphia,

Philadelphia, Pa.

% door Governor Korrioi

lo ha to received o nuobcr of requests for further information regarding thft detail* of tha plan adopted by the (/pen ifrrkot InvoBtoant Con- . aitteo relative to tne distribution of bills parchaaod in the open ocrket by the Federal Roaervc Syetes*

The plan provide• that the distribution of blllo shall bo nade is suefc o nanner that the rooonros of oaoh participating federal roaerve bank w ill bo so aifociod a* to roduoo tne reserve percentages of euoh bank by the ease per sent, or fraction of per cent, that ie to say, that on a day when tbo total b ill* yurahaeau wero sufficient to roduoo each participating bank'a reaerva percentage ljC, two bonka haying ratios of 80jC and 60)1 respectively oool4 after distribution have 79jC and reserve ratios respectively.

The proportion of total purchasee to bo allotted to oaoh partial* patlng bank to achieve this revolt it arrived at for practical purposes by dividing tbo total oi dopooito and notes of each bank by the relative totals of a ll participating banks, the resulting fraction equaling the percentage ratio of distribution applicable to the iadiixdu»l bank*

Attached is a schedule showing how the plan oould work based on the total dopoolt and Federal Reserve Roto lia b ilitie s of a ll Fedsral reserve bonks on Novonbor 7, 1923 and purchases of •bills aado during that week IT a l l twelve banka participated.

In tieoordance with the resolution plated by the Gomaittee, allot- ■onto would be nade to Fed oral reeervo banka by the Committee on this basis, ad J tinted, ho«ever,as to dollar anounts by tbo Comaittee, through its Secretary eaoh neot., in acfioraanue with sepcrts to t.b* Cooalttas of tha aoounta bought etAsrwlee »Un through tne Cc-.aalttao, by each participating bank during the week prevluikj the purpose of euch adJustnen*. being to r:*intein a practically conetant rntxe of laveetaents in eaush bonk.

i ahull be glad to bo advissd whot ier this ox^lnnation of the plao is entirely elear, and if you w*eh to participate at thie liue.

Tory truly yours.

V. 9. itittooonSecretary of the Cocalttee

Inolosuro •8X0 WSlKAH

■' v- 'VDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIEDAuthority &Q / 2

mmxwm m im m im mm karts* stxLiai.Hinatee of mooting of Tmm&mr 6*

1923, at &.30 p«»«

She Const t t e o met a t 2«30 p«au* on Eoreraber 8th« In &r« I ' l l l e r ’e offle e *

Presents Hr# ’ i l i o r , r* Platt* rr* Stoaart* Sooretaaqr# and Mr# inoton and

&r* G ilb e r t by in r l ta t io n *

fhs OoRmittee rosaaed ooosidoratlon of th* test method of patting into

operation tho separata r«««rr« ratios* tar* Stewart reported that lay transfaiw

ring the Boston and Cler«land hanks from tho 90 per sent to 100 per sent olass,

tho Hintieapolis hanlc from tho 70 per ooxit to the 90 per omit ol aso» end tho

Elaixiend hanfc free the $0 par oont to tho AO per oont olass, It would hcare/bean

poeeible to mlntain Ouriag tho fir s t 10 raonthe of 19*3 t note resorts ratio for

tho astern f&09* tho 90 per oont ainlimBu ifta r sew* disoassion it woo eonolttdsd

that the host plan of proeeditre was to follow tho saetfeod lndioate4 In the mammm* 0m preaontad to tho Jcunittoo on EOrerafoer 7th* It was tho eoneo of tho Oassaltteo

that tho plan should he j« t Into operation early its 1984, that •operate reearres

should ho nalntalned a&einet notoo and deposits by oa*fe individual hank* that

noto end deposit reeorve ratios for tho Syetoa should ho published weekly hgr the

Board* that stateowint* of individual reserve hanks show tho amount of noto resorve

and of deposit reeerre, hat that it oi$ht ho advisable to dafor tho pahlloatlon

of noto and depoeit ratio* for tho individual haafes until eaqporlenoo with tho

plan in&toatod that their pctblloot ion was dostrahlo* In view of tho reserve po

sitions of the individual reservo banks, tho Ooanlttoe was of tho opinion that

it w ill probably ho feaaihlo whan the pim lo pot into operation to mintaln at

least a 90 por oont note reserve for tho %stOK*

(Hr* OonningftsRt, who ooult not ho iresant nahon tho omsnittoe fir s t net, os&e in at this tine*)



d eclassifiedAuthority % £ )/ 2J 7 5 f

z .

’8 m Oocriittee considered the proj/oeal mde in ftr* fiU krt*a letter of August

6th with regard to gold fe&m&ntn by federal reserver bai&s* After &isous*tact of tho

proposal the Committee rcaasftenufttt to tho Board tho following resolutions

tffeeroas i t I» the m m ef the fed***! fteserro Board Ito l i t Is

desirable that gold oortlfloatoo bo reetorsd to circulation la artier

a g a l*i to b u i l d u p a s e c o n d a ry r e s e r v e | amipolicy

Whereas i t ia important that a system in respect to gpld payments

ahoula be adopt* toy the Several ileeenre 3yetemy

.Tesolveo that the ^deral oaoiro Baisfcs, acting in cooperation

with the Federal esorve Board (due regard being had to the reserve

poeition of the respective b&ii&s) shall roe tore to ei reflation daring

the yeur 1924 an aroeunt of i^old certificates to an aggregate aagunt

of five hundrod millions of dollara«

:esolvev further that the Covemor be instructed to advise the

Federal *servo Ban*® of these resolutions and to transmit to the

Federal ieeerve Baialse such further instruct ions as may be necessary

to carry them into effect#

« * * » « *

'She Oocaaittee also GenetOered the suggestion matie in £Sr« G ilberts le tte r

of August 3rd concerning the maintenance of a differential between ths redis

count rate for oercmreial paper and open f&arfest rates* The Jcramittee believes

that tho Board should reaffirm tho principle that a differential should be reoo#?-

nised between rediscount rates on eoereroial paper and open amrket rates, and


DECLASSIFIEDAuthority <Sp f Z C?5 &


tfcat tha of paper entitled to tills differtmtial ana the ax tent or euah

differential ehgald W gives epeelfle m e Iteration In acraaeotlcm with angr future

e*mx*l xmflw of *e4l namit ratee#

the Umanlttee eAJcmraea a t 4*90 j>#m*




Authority 0 1 2 /7 5 /

> j y.- . 1

I$ FILL:; ;; • -rio o m irm i m aisocura m ® uam >s m i c a u DEC 16 193

Mlnitas of awatlag of twmbw 6* X9fe£v a t 10*00 a«n*

- . . ....... .JK6V

2 - 3Sha Ooanlttaa »at 1» tha Board loon at 10*00 a«ia*v SUmabar M u ivaaoaitt

Sip* Minor, Mr* lla t t , £r* JuualngtM, and V*. Stasart, Saoratarjr* itr* ilttatan

h i praaaat hp liarltatloiu

2ha Ooualttaa ooatlsaad tha oanaldaratloa of tha plan for intUng Into

operation Uta atataaant af nata raaarva and dapoalta raaarra ratloa* 4 m u k *

taafttary sagaora&aoa aa* proaontod atoioh raodlfied tha aathad In tha

aarXlar ?■«ancmkiMfeMa* aatdlf Ijad pfaspaaal poaaife&a tha mai&to&anoa of a

oaoataat &ota raaarra ratio for tho aaratdBv* but had tha diaadra&taga of praaaat-

iag %ato*» not* ratio whloh aaa not aanpatad antlr aXy frow? tha aotaal M pnlton

of m a m a to ha naiatalxiati by tha iztdiridaal banka. A oosv of thla aopplorwttt-

afjr oaaMKnoMtna ia fllad with tha ninato* of thla maatlx^*

Hr# MlU«r auggoatad that iaataad of mdartaldhg to mlatain a oonata&t nota

ratio for tlia spat** aa a ahola, tha sate ratio for tha Sjyatam ha ragardad aa a

sad that r&tlaa of tha iadltldiMul ha ad^tiatad la oitoh a ” *p»*y aa

to feoajp tha aata ratio far tha %ata© aa a whole frm falling halov tha aatab-

llahad MtalMau Ha ^ivlaiOB af Beaaarah ami 'tatutloa aa* iaatrootad to am*

aldar aad report hadfc to tha uanalttaa ahat aomPU ha laralfad is tha practical

$g*ratia& af eaofa a Bothad* mmm&Mg that uadar jvaaant aaaAltloia a 90 par oant

itntw a aata ratio for tha 3yata» ha naietalnad*

$ha uoanittaa adlooraad to aaat at d«S0 2>«su



DECLASSIFIEDAuthority / 2 9 S X

I

COMMITTEE OI\T DISCOUNT AID O P M MARKET - 1

The Committee on Discount and Open Market Policy met at the Board Room at 10.00 a.m., November 7th. Present: Mr. Miller, Mr. Platt, Mr.

Cunningham, and Mr. Stewart, Secretary. At the invitation of the Committee Mr. Winston was present. Mr. Gilbert, who was unable to be present

at the opening of the meeting, cam in before the meeting closed.Mr. Miller referred to the action of the Board on September 11,

1923, referring to the Committee the problem of working out all necessary

details in connection with making recommendations for putting into operation the new plan of stating the reserve ratio separately for notes and deposits. The Committee had before it a memorandum prepared by the

Division of Research and Statistics, which indicated a method by which

the new plan could be made operative. A copy of this memorandum is

attached to the minutes of this meeting.There was a general discussion of the various aspects of the problem

with special attention to the desirability of maintaining a note reserve ratio for the System that would be free from minor fluctuations and would

change on occasion only in round numbers, for example, from 90 per cdnt

to 85 per cent. The Division of Research and Statistics was instructed

to prepare a supplementary memorandum which would consider the possibility

of such a method of stating the reserve ratio for the System and still

relating to the actual oporattttg ratios of individual banks.




REC'D IN , .CORDS SE

THE UNDERSECRETARY OF TH ; TREAS0i& 6 1958W A S H IN G TO N

Uoveraber 6, 1925.

Dear Kr. Eddy:I have your letter of this date, and note that

the Federal Reserve Board’s Committee on Discount and Open Market Policy will hold a meeting tomorrow morning at 10:00 o*clock to consider the details of the Board’s new plan for stating the reserve positions of the Federal Be serve Banks, as well as the proposed resolution with respect to gold payments and the suggested differential between line of credit loans and open market paper.

I I have an appointment tomorrow morning that is likely toextend beyond 10:00 o’clock, but I shall be glad, if possible, to arrange to attend the meeting at sometime during the course of the discussion.

Very truly yours,

8. P. GILBERT, Jr.,Under Secretary*

./alter L. Eddy, Esq..,Secretary, Federal Reserve Board,Washington, D. G.



^D eclassifiedAuthority

November 2, 1925 j j 2, ...

The Governor stated that the purpose of the meeting was to consider a telephone request from the Chairman of the Board of Directors of the Federal Reserve Bank of Boston, for immediate permission to that bank to buy in the open market $20,000,000 of United States treasury certificates of indebtedness, the purpose of the purchase being to build up the earning assets of the bank, on the theory that its reserve position is now high and the condition of the securities market is easy.

The Governor stated that Mr. Case, Deputy Governor of the Federal Reserve Bank of Hew York, also Acting Chairman of the Open Market Committee of Governors was in his office, having called in connection with another matter, and the members of the Board expressed a desire that Mr. Case be invited into the meeting. Upon the entrance of Mr ..Case into the room a discussion ensued as to the conditions prevailing in the securities and general money markets said of the desirability and necessity of the Boston bank purchasing government securities or bills in the Open Market at this time. During the course of the discussion, Mr. Dawes was called from the meeting.

Mr. Case was interrogated as to the open market investment holdings of the Federal Reserve banks, more particularly with reference to their holdings of acceptances. In reply to a question put to him, \ he stated that the New York bank h$d about $25,000,000 of acceptances * purchased in the open market which it would be willing to sell to any Federal Reserve bank which needed investments in order to keep up its earnings.

Following the discussion, Dr. Miller offered the following resolution, all members then present voting its adoption:

"Board feels this to be very important matter, inasmuch as it marks first departure by any one of the larger Federal Reserve banks from the policy laid down, to govern open market operations. Board feels that no change should be made in the general open market policy until matter is canvassed by Open Committee end views of the Committee presented to the Board. Board sees nothing in the condition of the money market which would warrant the Boston bank or any other Reserve bank purchasing Treasury securities at this time."

The Governor was requested to advise the Boston bank accordingly.



DECLASSIFIEDAuthority & Q / 2 - 9 5 7

FEDERAL RESERVEW ASHINGTON

B O .

Xovmnher ZB 1923•

HardingBoston

Confirming what X told you aver telephone regarding your bank being permitted to purchase government a purities in open market natter considered by~E^rc[ tMr ifloming and follonring resolution adopted quote^Board feels this to be very important matter, inasmuch as it marks first departure by any one of the larger Federal Heserve Banks froa the policy lai3T down to open market operations* Boardfeels that no flange should be made in the general open market policy until matter is canvassed by Open Market Committee and views of the Coianittee presented to the Board* Board sees nothing in the condition of the money market which would warrant the Boston bank or ai$r other a Reserve bank purchasing Treasury securities at this time*

Crissinger(Signed) I>. R. Crissinger

O FFIC IA L B U S IN E S S G O VERN M EN T R A T E S

C h a r g e F e d e r a l R e s e r v e B o a r dDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIED Authority & Q /2 J ? 5 J

DERAL RESERVE BANKOF DALLAS

October 10, 1923

Federal Beserve Board, Washington, D. C.

Attention Mr* PlattGentlemen:

Receipt is acknowledged of Mr* Platt*a 1 e ~9 | [October 4 A which oonfinns the Board1 sTele- gram of the sane date in which we were advised that the Board would not object to our purchasing in the open market Government obligations of short maturities to the amount of $10,000,000. It is noted that the Treasury would a little prefer that v/e buy notes rather than certificates, and also that it is the desire of the Board that we buy bills or perhaps even warrants to the extent that we are able to do so before availing ourselves of the permission granted by the Board.

Our reserve yesterday was in excess of 60 per cent and our earning assets had run down somewhat from high point. As a result we authorized the Federal Reserve Bank of New York to purchase for our account $7,000,000 of Government securities. Two million dollars of these obligations were purchased from another Federal Be serve Bank and the remaining amount in the open market.

We are grateful to the Board for its action in this connection.

Very truly yours,

Governor r e c e i v e **

BAH ms

J



DECLASSIFIED Authority i o / Z ? 5 ' f

October 4, 1993*

Saar Governor McKimey:

I subaittad war letter of Sestetaber 39 th. to the federal Biterra Board yesterd ay.In It you etata that tbs loans at tha Federal Beserto Bank of Dallas haw decreased since Sop tombar 1st from appro xiicately $50,000,000 to lass than $33,000*000, and you point oat tha necessity, or at laast tha advisability of ksepisg your earning assets up so as to hav* sufficient earnings to «eet not only dividend requir eocmts but possible losses that aay occur in aertain sections of the district. You ask that the Board give lta sanction to the federal Be serve Bark of Dallas for th* purchase of Government obligations of short aaturities.

Tha Board has taken tha facts presented into consideration and agrees with you that the federal Be serve Bank of Dallas should be considered at this tlae an exception to the general rule that Government securities should not be purchased for IntastcMint, and will offer no objection, therefore, to the purchase of say $10,000,000 of such securities. This conclusion you have already received by telegraph. The Board would prefer to hava you buy b ills of warrants but i f you findit necassary to buy $10, 000,000 of short term Government securities it will n&ke no objection. I aay add that I understand that the Treasury would a lit t le prefer to have you buy notes rather thaa aartl

Tours very truly

Vice Governor

Mr. B. A. McKinney, Governor, federal Beeerva Bank,

Dallas, Texaa.



DECLASSIFIEDAuthority &() /2 ?S~T

MoXlnnay - Dftllas.

Board w ill aaka no ob^otlon to puroha«a by your barifc of tan

Billion •aourltlat snggettad in yow lot tor of Saptaoibar 39thy

PLATT.




October 3, 1923Mr* Platt presented a letter dated September 29th| addressed to

him by the Governor of the Federal Re serve *l?ank of ]5allas with respect to the possibility of their purchasing in the open market a sufficient amount of short time government securities to enable them to maintain their earning assets at a proper figure, such purchases being agreed to by the members of the Open Market Investment Committee for the Federal Reserve System.

Upon motion, the Board voted to approve the purchase of short time government securities by the Federal Reserve Bank of Dallas, subject to a conference with officials of the Treasury.



declassifiedAuthority <T

WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TOTHE FEDERAL RESERVE BOARD September 29, 1923*

Dear fcr. Platt:

You will recall that I spoke to ycra yesterday afternoon with reference to the importance of our maintaining our earning assets at a fairly maximum figure. As the members of the Board will understand, our discounts run off very rapidly early in the fall with the result that it soon becomes necessary for us to employ our surplus funds in outside or open market investments.Our loans to member banks reached their maximum on September 1st, \ the amount of these loans being approximately #50,000,000.00. IBeginning with September 2nd, they began to run off very rapidly and at the present time they are less than $50,000,000.00. \We have been able so far to purchase in the open market bankersT \acceptances in the approximate amount of f22,000,000.00, but at the present time we are experiencing considerable difficulty in finding bills. I was advised by Deputy Governor Emerson yesterday that just now we have unfilled orders to the amount of tyl,750,000.00. Bills seem to be very scarce. I have discussed with governors Harding, morris and rancher, of the Open larket Investment Committee for the federal Reserve System, and also with Messrs. Jay and Heath, representing respectively lir. Case and Governor Icijougal, who constitute the other two members of the committee, the possibility of our purchasing in the open market a sufficient amount of short time Government securities to enable us to maintain our earning assets at a proper figure. iiach of these gentlemen authorized me to say to the Board that their committee would favor making an exception in the case of the Federal Reserve Bank of Dallas, and would acquiesce in our taking on these Government obligations. I pointed out to them, and they agreed with me, that our purchase of the necessary amount of these securities would be negligible and in no material manner interfere with the Treasury’s general program.

as i have explained to several members of the Board, the general situation in the Eleventh federal Reserve .District is quite favorable from the standpoint of general liquidation and many of our previously extended banks are now finding themselves in a happier condition, nevertheless, we feel it necessary to accumulate a fairly substantial amount of earnings in excess of expenses and dividends in order to be able to absorb losses which we are inclined to believe will yet materialize in connection with the restoration of our district to




Authority &Q / 2 . 7 S T

a normal status. We have yet some twenty-five or thirty banks whose condition is very acute, and we are of the opinion that some of these banks will not be able to make it through.. . While pursuing a policy of helpfulness and endeavoring to save every bank ifaere it is possible, the process of elimination must necessarily go on, with the result indicated above. Not alone is this true, but we believe that it is important that we do not permit our reserve position to reach a very high figure for the psychological effect it may have upon the district, encouraging a too free resort to the rediscount facilities of the Federal reserve bank. We are encouraging those member banks who have retired their rediscounts with us and whose funds are piling up very rapidly to invest their surplus funds in bankers* acceptances and other outside investments to the end that they may be able to conserve their resources and be able to meet the inevitable decline in their deposits, as well as the seasonal demands in their respective communities when the next crop making period begins. We, therefore, furnish many of these bonks acceptances out of our own portfolios, which calls for further purchases for our own account.

ITie attention of the Board is called to the further fact that the Dallas Federal Reserve Bank is the only one of the twelve baniks whose surplus has not yet reached an amount equal to its subscribed capital stock and, therefore, if for any reason our accumulated earnings in excess of expenses and dividends should not be needed for possible losses, it would be available at the end of the year for transfer to the surplus account, which is approximately $1,000,000.00 less than our subscribed capital.

In view of the fact that our liquidation in the early days of October will no doubt bring us to the point where our earning assets will not afford us sufficient earnings* to cover our expenses and dividends, I shall greatly appreciate it if the Board will give consideration at as early a date as possible to the facts detailed in this letter, and if consistent, permit us to purchase in the open market, say ten or fifteen million dollars of government obligations with short maturities, advising me by wire at Dallas of its action.

Veryymi^ vours,

3. 1. McKinney, Governor/ ~ Federal Reserve Bank of Dallas.

Hon. Edmund Platt, vice Governor,Federal Reserve Board,

Washington, D. 0*




Authority &QJ2.J75T

Fori* No. 181.

Office Corresj.vV*' FEDERAL RESERVEice board/

To Mr. Cunningham

From___ Mr

member for consideration

"Recommen

Date. 3 cp t emb e r 19.3 3 3 ' ^

At the meeting of the Board thjp morning, it y;as voted to refer to the Committee on Discount and Oden Market Policies, of which you are

thereon to the Board, the following

recommendation of the Federal JELvisory Council:

n No. 1: The Federal Advisory Counoilhas considered carefully the letter from the Under Secretary of the Treasury to the Governor of the Feaeral Reserve Board dated August 3. 1923. suggesting a certain differential between the rediscount rate for commercial paper and the op an market rate for/barkers’ aocegotances and approves of the principle, but i/ of the opinion that the time is not opportune to increase the existing differential rate to the flottent suggesteijLn

■Jt d**' * v ^

1923. _ /

2— 849fi

a



d e c l a s s if ie d ^A u t h o r i t y / 2J?5T

FEDERAL RESERVE BANK OF CHIC2 3 0 S O U T H L A S A L L E S T R E E T

1EIVED

o m m m mMR. A. a MJBMEt


August 18, 1923,

Mr* A. C. Miller,o/o Federal Reserve Board,

Washington, D, G.

Ufy dear Mr. Miller;

I have received and carefully read the copy of Mr. Gilberts letter addressed to the Governor of the Federal Reserve Boa?&, enclosed in your letter of the 14th instant* / .......

!2he views expressed with respect to the subjects of open market rates, rediscount rates and their relationship to'R’ard each other, it seems to me, have a great deal to conmend them.

¥e shall give the same very careful consideration in anticipation of the subjects being presented at the next meeting of the Open Iferket Investment Committee.

Very truly yours,



DECLASSIFIED Authority > 0 /2 -9 5 ^

F e d e r a l R e s e r v e B a n k o f C l e v e l a i

j>.,’ 1MVED. / i G i ? A ' o m u u o vm a n Mirijn


August 17, 1923.

Dr. A. C. Hiller,

c/o Federal Reserve Board,

Washington, D. C*

Dear Sir: /Your letter of August 14,/with en-

closure, addressed to Governor Fancher, is re<

ceived during the Governor’s absence from the

bank. He is array on his vacation, and tvill

return about the first of the month, at which

tine your letter vn.ll receive his prompt at

tention.

Very truly yours,



""^d e c l a s s if ie d

Authority /2J7ST1T

Fe d e r a l R e s e r v e Ba n k

o f N ew Yo r k

Attention of Mr. Miller.

S i r s :In the absence of Mr. Case I acknowledge receipt of

your letter of August 14/addressed to him, with which you enclosed

copy of a communication from the Under Secretary of the Treasury on the subject of open market rates and rediscount rates at Federal

Reserve banks and their relationships.

I shall be pleased to see that this matter is brought

to the attention of the officers of the bank who are interested, as well as to Mr. Case’s attention upon his return.

Respectfully,

L. F. SAILER, Deputy Governor.

Federal Reserve Board, Washington, D. C,

is^OETVEDA t ' < 3 : i 7 1 S 2 3QKVSUMGV

itotj in m m Action

AUG * *

LgUS t




Boar l£r« a&sot

I m for yoar iaToau«tioa o&dfos* th** consideration of tin) im xk&t Dwostmant Policy Cfesalttoo a t it# mxt aeotiag copy or

p J ju L 1 3 1 . 0 3mini oat ion j &Ady©8 sod to th© Oou\>mor of t&s ftodor&l

aeseFve Board bjr thft Oadar 'j«ciretary of tha ’jjpoasriry

on fch# sabjaat cf siaAot raters re discount

ratee at Fodmral lieaorr-:? 9axe-c0 and thoi? ml&fcifm^i?*

B^Hove if«ef

Very truly .yours.

i^ilOBUTQ.

M*« J . H. Oase,Aafciag ovdifaoi*, F«d#*al R®*erv® B&afc,H w Oity*

A*4gwst 14* 19&8*



^ d e c l a s s if ie d

Authority &Q /2J?£TF

• b

Aue&at 14, 19P&*

]>ear &r* Ho£oug»lf

i. m mini®3 km; f o r y o u r ia ^ o rza fttto a and

fur the oaueiteration oi the o^en Ear&et li^eetmeiitPol icy oonaittoe xtp naxt meeting eopgr of a am®**

- f - t t A i 0 Z iistxal eat ion (addressed to th e lo 're ra o r of the Federalitaeerve Board by the ’Under seorotay of the Treasury

on the s\ugeet of ttarfcet rates &od rediscount

rates at feaer&l aeeetrre Batfta* aad their rolaticmsHip#

Believe me,

Very trttly yom*sf

Enclosure*

Mr* J* B*Governor, fedor&l iiesery© Bajfic, ahioego* 111*



DECLASSIFIED Authority f 2. cfS^^

. 4

£rff s’jmchen

i m <mol©»iag * * * fsm infoiwatioa m l

for the oca* id oration #f Opoa Maarlc«t lrxr#8tmwit

1^1 loy Gawnitte* at its wmto s»*ting oopy #£ a d m *& /3/21 - L 'U - J - —

ramii sUcmj mdk**s»altQ tha Oovaraor of tho

E#*#rr# oai*d l r the TMmp Stcrotary of th* tr*wr«*y

da tiie imlij*®* of opam oarteet tf&tot* tm£

ratm at ?odor»l Hesarr© Baffles and their relationship*

Beliere no,

T«ry trolly toots f

^eloaurs*/

Kr* I* It* Faaeher,Governor, i^dara! ile»*ry« Glove3*aui, Ohio*



^ d e c l a s s if ie d

Authority S(J

O w1 *

57*. / yAugust 14, 1823

Letter, dated_ August 4f 1923j from the Under Secretary of the Treasury, enclosing copy of communication addressed by him to Deputy Governor Case, of the Federal Reserve Bank of New York, with respect to the investment holdings of the Federal Reserve Banks.

Referred to the Committee on Discount and Open Market Policies.

August 21, 1923

Report of the Committee on Discount and Open Market Policy, with reference to the matter referred to it on August 14th, namely, letter of August 4, 1923 from the Under Secretary of the Treasury, enclosing copy of communication addressed by him to Deputy Governor Case, of the Federal Reserve Bank of New York, regarding the investment holdings of the Federal Reserve Banks; the Committee reporting that no further action by the Board is necessary at this time.

Noted




Authority jr /y

Form No. 181. fOffice Corresj i^Jeace


■*«» «, j£""* \/ bate M tftaSt 14, 1925.

ToMr. Miller, uhairman.

From.

and open 1.: Mr. Holton_____ =

Qoamittee on Dlseotmt rtoet Policy

Subject:.

V

At the meeting of the Federal reserve Board this morning, the attached letter f£om the Undersecretary of the treasury, dated AngnstL-l^^^jjaM enclosing copy of a eommanicat ion addressed by him to Deputy Governor Case, of the Federal Reserve Bank of Few York, with respect to the investment holdings of the Federal Reserve banks, was referred to the Coirmittee on Discount and Open Market Policy.

AT BOARD MEETING

AUG 2 1 1923

{UUL&Jlk** > 3




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3

Jngort t, 1923.

te a r S r . O U tartt

1 hftfA not*dL with Kuan. Intorttot 'rao.r Ittttsr a f fataw-’

4 mmw—mii# tJso 9Mitl>ilit7 o f tltt {hwa Mm&mt oaai^lcaui

feol»3 «nt«ro& ui>on again % the $e&»n& Booor?* Baidcs i f

tKa oayRiiig ®Ogl6®it5|f Of tltf aftHfriffifl. |m *HNltftfl tO

m o*fcoat whiah oiioald jpweat tho baaks tcm oaralug tiiair

**jk»u»o.3» I ^ a lt fe a ^ ro © w i t h you i s y o a r * id w « t o tills

JPOOlMMtt*

2 tag to odvioe you. t&ttfc yao? l« tte r w ill &o brought

to Ujo a.t la.it iuu of t&e Board with a oopy of yoi*r lot tor to

filVIFMPBftl*FwW- VOOMNI HP VPAP

T«py tru ly jro tn *

(S igned) I). K- Cris-einger,

OoToroar*

Boa* i« * • a ilfc o rt, f f ite r Soaretary o f tfeo W wwo^r* Wa*fciagte&« $* o*




\ VTHE UNDERSECRETARY OF

W ASH IN G T O f

\

Dear Dr. Miller:

I am enclosing herewith for your informat Iona a copy of my letter of this date to the Governor of the Federal Reserve Board, together with a copy of my letter of August 3rd to Deputy Governor Case of the Federal Reserve Bank of New York, all with reference to the investments of the Federal Reserve Banks.

S. P. GILBERT, *•*, Under Secretary*

Bon* A. C. Miller, Federal Reserve Board Washington, D. C.

2 enclosures



DicLASSIFTEDAuthority

August 4# 19S8*

My d«ir OfnrsoriI mi enclosing herewith for your information * oopy of my

Xotter of August S, 19tS» to Deputy Governor Oast of the Federal Bo*

serve Bank of Mm York, n Acting Chairman of the Committee of (taverners

on Open Market Operations* ^ th respoot to the investment holding* of

the Federal Reserve Banks* It w ill, in ny judgpmt, require constant

Tigilinot on ilio part of both the Federal Reeerve Boerd and the Com*

mitteo of Governors to save the Federal Ksssrve System from a repetition

of the unfortunate experiences of the fir s t half of 1992* At present

the position is well liquidate** and the matter ie under control, bat

as soon as earning assots fa ll low enough to threaten expenses sad dividends

thors w ill lie renewed efforts on the part of at least some of the Federal

Beserve Bemks to save th easel vet hy investing in Government ssouritios

aocsptanssa without regard to the effect on the general credit situa-

Tory truly yours*

s* p* oxum v, tadar Secretary*

Bon* ©* H, Crissinger, tmrarpor, T»dartl £m«tt* Board, Wftshlagtcn, s . c.

W M o i w iDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIEDAuthority $>Q / Z

copy

August S, 1928*

Dm t Ifr. Casa:I received your letter of July 12, 1923, and have examined

with interest the aaoloaed statement showing comparative figures as to holdings of Government securities Vy tha Federal Reserve Banks on July 3, 1925* and various other days during the past year# It is a remarkable showing, particularly when one remembers that out of the pr esent holdings only about #60,000,000 represent investment holdings,- the others being held under sales oontraots or representing old purchases

of Government bonds* The position has been vail liquidated and is

now under control* That of Itself will help to make the discount

rata more effective i&ien the time comes*X hope that it will never again ba possible for any Federal

Reserve Bank or Banks to run up a situation like that which developed in the first half of 1922, and that if anything of the sort ever threatens again tha Committee of Governors, and if necessary the Federal Reserve Board, will step in and stop it before it gets iftarted* I am afraid that if the Federal Reserve Banks were left to themselves many of the

Governors would be off again on a firolic of their own whenever thair earning assets bagan to fall# All of them have gone along well with the

Committee, but I suspect that many of them art trtill cgalte unredeemed*Vary truly yours,

(Sigied) S* P* Gilbert, Jr *J. H. Casa, Esq*, Undor Secretary.Acting Governor, Federal Reserve Bank,Saw Tork, N. T.


$ Reproduced from the Unclassified I Declassified Holdings of the National Archives


T H E U N D E R S E C R E T A R Y O F T H E TR E A S U R Y ^ -

WASHINGTON

August 4, 1923.

i f

My dear Governor:I am enclosing herewith for your information a copy of ray

letter of August 3, 1923, to Deputy Governor Case of the Federal Re- 3erve Bank of New York, as Acting Chairman of the Committee of Governor* on Open Market Operations, with respect to the investment holdings of the Federal Reserve Banks. It will, in my judgment, require constant vigilance on the part of both the Federal Reserve Board and the Committee of Governors to save the Federal Reserve System from a repetition of the unfortunate experiences of the first half of 1922* At present the position is well liquidated, and the matter is under control, but

as soon as earning assets fall low enough to threaten expenses and dividends

ther® will be renewed efforts on the part of at least some of the Federal Reserve Banks to save themselves by investing in Government securities and acceptances without regard to the effect on the general credit situation.

Hon. D. R. Crissinger,Governor, Federal Reserve BoardWashington, D. C.

1 enclosureDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

epr^^^fortfttieO ftdaSStfted’/ DedaSSfBWfloldirtgs of the N a M ^ fw S s


Authority Bq /Z ^ S J

COPY

August 3, 1923.

Dear Mr. Case:I received your letter of July 12, 1923, and have examined

■with interest the enclosed statement showing comparative figures as to holdings of Government securities by the Federal Reserve Banks on July 3, 1923, and various other days during the past year. It is a remarkable showing, particularly when one remembers that out of the present

holdings only about $50,000,000 represent investment holdings,- the others being held under sales contracts or representing old purchases of Government bonds. The position has been well liquidated and is

now under control. That of itself will help to make the discount rate more effective -when the time comes.

I hope that it will never again be possible for any Federal Reserve Bank or Banks to run up a situation like that which developed in the first half of 1922, and that if anything of the sort ever threatens again the Committee of Governors, and if necessary the Federal Reserve

Board, will step in and stop it before it gets atarted. I am afraid that if the Federal Reserve Banks were left to themselves many of the

Governors would be off again on a frolic of tfteir own whenever their earning assets began to fall. All of them have gone along well with the Committee, but I suspect that many of them are still quite unredeemed.

Very truly yours,(Signed) S. P. Gilbert, Jr.

J. H. Case, Esq., Under Secretary.Acting Governor, Federal Reserve Bank,New York, N. Y.



>

DECLASSIFIEDAuthority / 2 ? S T

< THE UNDERSECRETARY OF THi REASURY

September 16, 1922.

TO DR. MILLER:

In accordance nith our conversation, I am attaching a copy of a confidential letter dated

September 13, 1922, which I have sent Governor Strong, in order to raise again the question as to Federal Reserve Bank investments in Government securities* I have not yet had any reply from

Governor Strong.

SPG SMG


Repioduced fiom the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIEDAuthority & {j / 2L?¥& j

REC’D * , RECORDS SECTION

F E B 6 1358

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wOatloa to tha aotoal naoa»«ltlaa of th« taartet. Bvaa uaAar tha

ooatrallsad oontrol which b i toon aatabllofead, paroha—» af ttavara-

naat oaoujrltiaa by tha fadarai Ji*t#*n?a ta tfa aro a t i l i # I t mmm 'ta

na, g**#rnod by Ktat tfea baafca bollavo to ba tfcair aaad* far i*ir-

poaaa af aarnlagt, with tha raoult that tha antra t af momy forc«d

into tha aarit*t thr*u& tha pirobmm of Gov*nu*mt •oouritioo la

»ara or laaa arbitrary «ad without raitatiaa ta tba actual

for ffa»A»«

V*ry truly yuare,

S. P. <7ar#tUndar sacratary.

lofrjaaim Strong, fcaq.ta/o fa*ar*A Boaarta a « u f 16 laaaan s tra a t.Saw Yo*kt H* X.



declassifiedAuthority / 2 J S 'f

COPY X-3S07THE UNTERSE CEET A BY OF THE TBEAS'

WASHINGTONW O IN RECORDS SECTION

F E B 6 1958■33 3. - JL- /

T J i y i W 3 , ------------------------------

My deax Governor:

I take it that there is no immediate occasion a.t this timeto consider possible advances in the discount rates of the Federal

Reserve Banks, but it is conceivable that some such occasion may arise in the not distant future, and I am therefore writing to suggest a method of approach to the problem which it seems to me has not been sufficiently considered in the past. I refer particularly to the possibility of establishing a different rate for discounts at the Federal Reserve Banks representing the ordinary line of credit loans

to commercial banks, as distinguished from paper of prime liquidity

which has at the same time a recognized open ma.rket, as, for example,

bankers acceptances and short-time Treasury certificates of indebted

ness* The Federal Reserve Banks now are proceeding generally on the basis of a uniform discount rate for all classes of paper, with a special buying rate for bankers acceptances. I take it that there is

nothing sacred, however, in a -uniform rate, and it is manifest

that any uniform rate necessarily fails to take into account the dif

ferences existing between different classes of paper* The most funda

mental difference, which is much better recognized in England and is coming to be recognized in this coiontry, is that between paper which

has a recognized status in the open market, like bankers acceptances and Treasury certificates, and paper like customers’ loans at a bank




Authority B p / 2 ? 5 T

-2- X-3S07which has no market status and cannot be readily teste^ by the open ma.rket.

There is a growing realization in the Federal Reserve System of the importance of the open market powers of the Federal Reserve

Ba.nks, and with that , it seems to ras, there must come a. better recog

nition of the fact that the v;oy for the Federal Reserve Banks to bring

their operations into relation with the general credit situation is

through an open market policy divorced entirely from any question of slak

ing enough earnings to meet expenses and dividends, and based instead on the market’s need for credit. There has already been much progress

along this line. For some years past the Trea.sury has been engaged in developing an open market for Treasury certificates of indebtedness, a.nd

there is now, and for seme time back ha.s been, an a.ctive open market, re

flecting accurately the investment values of Trea.sury certificates a.s liquid short-time securities and at the same time enabling the Trea.sury

to adjust the terms of its successive offerings to meet actual market con

ditions. The Federal Reserve Banks at the same time have been engaged in an effort to establish a. ma.rket for bankers acceptances and have achieved

some success, though frequently the buying rate at the Federal Reserve Banks ha.s been so low as to undersell the open market, leaving the Federal

Reserve Banks practically the only market for acceptances. More could be

accomplished if the buying rate for acceptances were kept up to the ma.r

ket, and I understand the Central Committee of Governors on open market

operations has been giving some study to this side of the problem. At any

rate, both the Trea.sury and the Federal Reserve Banks have had sufficient

experience with Treasury certificates and bankers acceptances to know



DECLASSIFIEDAuthority / 2 C7S

t3- X-3S07that an open market can be successfully developed for both classes of securities, and that if free of artificial influences this ma.rket will

constantly reflect the true position of the securities and afford free

play, through purchases and sales of certificates and acceptances, to changes in the credit situation.

The further development of the open market for certificates and

acceptances offers, it seems to me, the best opportunity in the world

for placing the Federal Reserve Banks income thing of the same relation

to the market here that the Bank of England holds to the bill market

over there, leaving the Federal Reserve Banks to deal , like the Bank of

England, with only the marginal demand for credit’* 'Che open market, in

other words, would act as a. kind of balance-wheel between the banks and

the Federal Beserve Banks. Banks in the financial centers would hold

in their portfolios reasonable amounts of liquid short-time securities,

like Treasury certificates and bankers acceptances, and when in need of

funds would sell certificates or acceptances to the ma.rket before hav

ing recourse to the Federal Beserve Banks'. The market would normally absorb the certificates or acceptances thus sold, probably through sale

to an investor or to another bank having.*an excess supply of funds, but

in the event of a. real lack of credit the market itself could apply to

the Federal Beserve Bank, through a sale of certificates or acceptances

to the Federal Reserve Bank under its open market powers* To some extent this is already what happens in the principal financial centers un

der the present system, but it breaks down in a situation where member

banks, without having recourse to the market, can get funds from the Federal Rese-rve Banks onthe same terms by discounting with the Federal



declassifiedAuthority &Q / 2 C75 J

-U- X-3S07

Reserve Ba.nks customers1 notes and line of credit loans which ha.ve

no standing in the open market. Under this system discounts of

customers’ notes a,re almost always made at a. ra.te lower than the

going ra.te for such paper, while sales of certificates or bills to

the Federal Reserve Banks, which must be regarded for practical pi - poses as only another form of discount, will probably be made at about

the open market rate, uni ess the Federal Reserve Banks themselves cut

in under the open market by esta.blishing artificially low buying rates

for bills* There is no real recognition given to paper enjoying an

open ma.rket, and what has been done in the name of encoura.ging the mar

ket for acceptances ha.s frequently tended to destroy it.

The remedy, it seems to me, would be to establish the ra.te of

discount on customers1 notes and line of credit loans at a sufficient

figure, sa.y, 1 per cent higher than the rate on Treasury certificates

and bankers acceptances, to match the going rate on commercial paper

and give a. differential in favor of paper which ha.s independent stand

ing in the open market* This would encourage the development of the

open market and bring the banks more and more to resort to the open

market for certificates and acceptances as a means of securing neces

sary funds or of employing funds temporarily idle. At the same time

it would tend to give an outside check on the credit policies of the

Federal Reserve Banks and through the inevitable relations tha.t would

arise between the banks and the market would keep the Federal Reserve

Lanks more on their mettle in the development of these policies,

. The suggestion offers particularly interesting possibilities



DECLASSIFIED™Authority£f) / I 75T

-5- X-3S07,in case there should be a. situation calling for ail increa.se in dis

count rates, for it would make it possible to recognize, a.s the official Federal Beserve ra.te, the rate on acceptances and certif icates

of indebtedness, witl^the proviso that the rate of discount on cus- tomersT notes and line of credit loans would be, say, 1 per cent

higher than the established rate, This would recognize the essential

differences between the two classes of pa.per, would be a. perfectly

safe distinction in view of the liquidity of the paper and the inde

pendent open market which it would enjoy, and would make the Federal Reserve rate more nearly comparable than it has ever been before to

the discount rate of the Bank of England. Incidentally, it would ha.ve the psychological advantage of leaving one official ra.te a.t the ' relatively lower figure, with a higher ra.te applicable to discounts-

of line of credit loans, which are handled ordinarily by banks in'

practically all sections of the country at a, ra.te considerably 'higher.

than the open market rate on certificates and acceptances* .'-The

differential would thus accord with the facts1; Even now, for example, \

with a per cent discount rate,' it is the. general practice of banks •

to charge around 5s pe** cent to their customers, and in many cases much more than this, whether in the form of direct interest charges

or through incidental charges in the form of commissions, fixed

deposits, and the like.A recognition of the differences between paper eiyoying an



d e c l a s s i f i e d

Authority £

*6- X-3S0Tindependent open market, like certificates and bankers acceptances,

and customers' paper or line of credit loans by banks , on the other

hand, would give the Federal lie serve Banks much more effective con

trol over the general credit situation, would put their rates into

better relation'with the going rates on the different cla.sses of

paper, and would enable them to exercise such control as might be

necessary through, increasing their ra.tes without at the same time

prejudicing the open market which has been built up for both cer

tificates and acceptances* To put it another way, it gives the

Federal Reserve Banks the opportunity to esta.blish their rate at or a.bove

the market without discriminating a,gainst certifica.tes and accept

ances % The facts are that there are different rates for different kinds of paper, lower rates for acceptances and certificates and

higher ra.tes for coinne cial paper, and unless the Federal Reserve

Banks are willing to recognize these facts it will always be impos

sible for them to get on top of the market without opera,ting unfairly

against certificates and acceptances* At the present time the

Federal Reserve rate on line of credit loans is undoubtedly below

the market and just as clearly above the market on certificates ana

acceptances* An increa.se to % P 0r cent, for example, would un

fairly penalize certificates and acceptances and s till not much

more than meet the market on customers* notes and line of credit

loans. Any increase in ra.tes large enough to put the Federal Re

serve rate on top of the market rate on customers5 notes and line

of credit losns would thus operate most unfairly against certificates



D E C L ASSJfTed

Authority £)/Z_7b

-7- X-3SO7

and. acceptances and seriously upset the market for these securities without giving Federal Reserve Banks much better control over the general situation. If, on the other hand, the differential is

reocgnized and different rates established for the different classes

of paper, it would be possible, by putting a higher discount rate on

customers* notes and line of credit loans, to put Federal Reserve

rates all around into efiective relation with outside rates and

thus accomplish what the Federal Reserve Banks have been hoping to

accomplish ever since their original organization*

The differential between the two classes of paper would

also have a direct bearing on our position in world trade and commerce, for it recognizes the popular cha.ra.cter of short-time paper

like acceptances and would make it possible to finance such paper a.t

an appropriate rate, unprejudiced by the higher ra.te that might be

applicable to ordinary commercial pa.per. This would enable cur bankers

and business men tc compete on more nearly an equality with the

other money markets of the world, and facilitate the development of

our own market for bills*Another thing to be said for the suggested differential in

ra.tes is that it would keep the Federal Reserve Banks on their

mettle, and require them in g.,11 their operations to keep in the

closest touch with the market. Both the Federal Reserve System and

the Treasury would have to exercise the utmost care to watch any artificial influences operating in the market for certificates or




Authority £<9 / 2 9 S T

-8- X-3S07acceptances, and to avoid at all costs any action on their own part

that would tend to put either certificates or acceptances on a false

"basis of value. The market itself will give a constant check on these things if not subjected to artificial influences, and would

be the "best test of whecher the rates were being intelligently ad

ministered by the Federal leaser?e Banks,

All of these suggestions are, of course, more or less ten

tative and would have to be fu'i they developed, but I am offering them

now in the light of the Treasury1s experience in these matters with

the thought that there may soon be a. real opportunity to consider

their application to the development of Federal Beserve policy. I

hope the Federal Reserve Boara will receive them on that basis, and

give sorne consideration to their possibilities m advance of the time when action will have to Da tcken. Tne term "Treasury certificates

of indebtedness”, I should add, ought to be regarded throughout this letter a.s meaning strictly what it says, and not as including other

Government securities like Liberty bonds or short-time Treasury notes*

Generally speaking, it seems to ns that Liberty bonds and Treasury

notes, not being at all in the cla.ss of short-time Treasury certificates

or bankers acceptances, and not having the same kind of a market, vrould

have to fall into the general classification and not enjoy a.iydif

ferent rate of discount than customers’ notes and line of credit loans.Sincerely yours,

(Signed) S. P* GILBERT, Jr., Hon. D. R« Cris singer, Under Secretary.Governor, Federal Reserve Board,Washington, D,C.



DECLASSIFIEDAuthority £ < 9 / 2 ? S T

\ T H E U N D E R S E C R E T A R Y O F ' , - T R E A S U R Y

August 3 , 1923*

TO DB. MI LIE R;

Federal Reserve Board.

I an a tta ch iag fo r your information and considor&tlon a copy of a l a t t e r which 1 have sent to-day to the Governor of tho Federal Reserve Board making soras ra th e r te n ta tiv e suggestions about the re la tio n between tho open market operations of the Federal Be serve Banta and th e ir discount p o licy . She Federal Be serve Banks now have a uniform ra te for a l l c la ss e s of paper, and some of them make a g re a t point of keeping the ra te uniform, but as indicated in the l e t t e r to Governor Griss inger, I believe th a t i t would be possible to get much b e tte r co n tro l over the c re d it s i tu a tio n by recognizing some d if fe re n tia l between the d iffe re n t c la sse s of paper.



DECLASSIFIED 'Authority / Z f f S * ?

COPY

MU* «N RECORDS SECTION FEB 6 1958

August S, 1923•

My diar Governor;

1 taka i t that there la no immediate oooas ion at this time

to consider possible advances in tha discount rates of tha Federal

Haserrs tak a , but i t la oaneeivable that some suoh occasion may

ariss in tha not distant future, and X aa therefore writing to suggest

a method of approach to tho problem ^ilch i t seeas to me haa not been

sufficiently considered in tha past* 1 rsfsr psrtioularly to tha

possibility of establishing a different rata for dlsoounts at the

Federal Reserve Banks rsprssanting tha ordinary line of credit loans

to commercial banks, as dlstinguidbed from pnpsr of prime liquidity

which has at ths sans time a recognised open market, as, for example,

bankers acceptances and short-time treasury certificates of indebted*

ness. Tho Federal teasnre Banks now are proceeding generally on ths

basis of a uniform dlsoount rata for a ll olassas of paper, with a

special buying rate to r banksrs aoceptanoce* X take i t that there is

nothing sacred, however, in a uniform rate, snd i t is manifest

that any uniform rata necessarily fails to take into account the dif-

farenoes existing between different classes of papar# The most funda-

mental difference, which is much bettor recognised in England end is

coadng to be recognised in this country, is that between paper which

has a recognised statue in the open market, like banksrs acceptances

and Treasury eertifioates, and paper like customers' loans at a bank



DECLASSIFIEDAuthority / 2 ? S T

which has no opon aarkot status and eannot bo roadlly tootod by tho opon

aarkot.

Thoro 1« o growing realisation in tho Fodoral Rasanra Systa*

of tho Importance of tho open aarkal powers of tho Federal fieoerve

Bsnks, and with that, i t oooao to no* thoro mot ooao o bottor rooog*

nitioa of tho foot that tho my fbr tho Federal Resonra Boaka to bring

tholr operations into relation with tho general orodit situation lo

through an open aorkot polioy diroroed entirely from any qneetlon of

asking onough earning* to moot expensee and dividends, ond baood lnetead

on tho aarkotfa Rood for orodit* Thoro hoo already boon auoh progreee

along this lino* For soae yoars poet tho Treasury hao bo an oxtgagod in

developing an opeiraarket fm Treasary oortlfioates of lndebtedneeo* ond

tharo lo now, and for aoao tiao fcaok haa been, an ootlvo opoa aarkot, re-

floating accurately tho Inrootaont values of froaoary oortifioatoa ao 11*

quid short-tiae seoorltle* anl a t tho ooao tiao enabling tho Treasury

to adjust tho tarao of its saooeeelve offering* to moot aotual aarkat oon-

ditiona* Tho Federal Hooarvw Bonks at tho ooao tiao horo boan engaged In

on of fort to establish a aarkot for bonkaro acceptances and hero achieved

oaao suoaou, thou# frequently tho buying rata a t tho Fodoral Reeerve

Banks has bom ao low ao to undereell tho opon aarkotf 1 oaring tha Fod

oral Kooonro Banks practically tho only aarkot for acceptances* ICoro could bo

aooonipllohod if tho haying rato for ooooptanooa waro kopt ap to tho aar*

ket, and I understand tho Central Oamittoo of Oorornora on opon aorkot operatlona haa boon giving sorae study to this sido of tho probloai* At any

rate, both tho Treasury ond tho Fodoral lessnw Banks have had sufficient

experience with Treasury oortlfloatoo and bankors aoooptanooo to knewDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIED Authority (TAj / 2. ^5^&

«5»

that an opmi marfcit can be successfully developed for both classes of

securities, and that if first of artificial influanoee this market will

constantly reflect ths true position of the securities and afford free

play, througlfpurchases and sales of certificates and acceptances* to

changes in ths credit situation*

The further development of the open market for certificates and

acceptances offers, i t seems to me, the best opportunity in the world

for placing the Federal Reserve Banks in something of the sass relation

to the market here that the Bank of England holds to ths bill market

orer there, leaving the Federal Reserve Banks to deal, like tha Bank of

England, with only the marginal dmsand for oredit* The open market, in

other wcr ds, would act as a kind of balance-wheel bet seen the banks and

the Federal Ressrvs Banks. Banks in ths financial osntsrs would hold

in their portfolios reasonable amounts of liquid short-time securities,

like Treasury certificates and bankvs acceptances, and when in need of

funds would sell certificates or acceptances to the market before har

ing recourse to the Federal Bessrre Banks* The market would normally

absorb the certificates or acceptances thus sold, probably through sals

to an investor or to another bank having an excess supply of funds, but

In the event of a real lack of oredlt the market Itself could apply to

the Federal Reserve Bank, through a sale of certificates or acceptances

to the Federal Ressrvs Bank under its open market powers* To some ex

tent this Is already what happens la ths principal financial centers un

der the pres sot system, but I t brsaks down in a situation where menber

banks, without having recourse to the market, can get funds from tho

Federal Reserve Banks on ths same terms by discounting with, ths FederalDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


DECLASSIFIEDAuthority £ < 9 / 2 . 9 5 ~ f

Reserve Banks customers* not00 and line of credit loane which her*

no standing in the open market* fnder tills eystaa discounts of

customers* nates ere almost always mad* at a lower rats than the

going rat# for suoh paper, while sales of certificates or b ills to

the Federal Reserve Bunks, which must be regarded for practical pur*

poses as only another font of discoimtf will probably be made at about

the open market ratef unless the Federal Reserve Banks themselves cut

in under the open market by eetsblishing artificially lew buying rates

far bills* There Is tobvifell recogaition given to pap or enjoying an

open market, and 4 * t has been done In the name of cnoouraging the mar

ket for acceptances has frequently tamded to destroy it*

She remedyA i t seems te mef would be to establish the rate of

discount on customers' nates and line of credit loans at a sufficient

figure, say, 1 per cent higher them the rate an treasury certificates

and bankers acceptances, to match the gaing rate on commercial paperft

and give a differential in favor of paper which has independent stand

ing in the open market* This would encourage the development of tha

#pen market end bring the banka more and more te resort to the open

market for certificates amd acceptances as a means of securing neces

sary funds or of employing funds temporarily id la* At the same time

i t would tend to give an outside check an the credit policies of the

Federal Reserve Banks and through the inevitable relatione ti» t would

arise between the banka and the market w>uld keep the Federal Reaerve

Banki more on their mettla in the development of thsee policies*

The suggestion offers particularly intereatlng possibilities




Authority £ < 9 / Z ? S f

-6-

in case there shoald be a situation calling for an increase in discount rates, for it would make it possible to recognise, as tha official federal B m m mta, tha rata on acceptances and certificates of indebtedness, with tha proviso that tha rata of discount on customers1 notes and lino of eradit loans would ha, say, 1 per cant higher than the a stab 11 shad rata. This would recognise tha eseential differences between tha two classes of paper, would ba a t*rfectly safe distinction in view of tha liquidity of tha paper and the independent open Market which it would enjoy, and would gmk* the ffederal Be serfs rate more nearly comparable than it has ever been before to the discount rate of the Bank of England. Incidentally, it would have the psychological advantage of leaving one official rate at the relatively lower figure, with a hi#*er rate applicable to discounts of line of credit loans, which are handled ordinarily by banks in practically all sections of the country at a rate considerably hi^ier than the open market rate on certificates and acceptances* the differential would thus accord with the facts. Even now, for ezaiaple,

with a 4i per cent discount rate, it is the general practice of banks to charge around && per cent to their customers, and in many oases such more than this, whether in tho form of direct interest charges or through incidental chargee in the form of conxalsslons, fixed deposits, and the like.

A recognition of the differences between paper enjoying an



DECLASSIFIED

Authority & {) / 2. C7t>

-6—

independent open market, like certificates and bankers acceptances, and cu 3 teeners' -paper or lino of orod.it loans by banks, on tho other hand, would give tho Aide ml Bessrve Bank* moh more effective control over tho general aredlt sitmtion, would put thoir rates into bettor relation with tho going ratee on the different classes of paper, and would enable them to exercise such control as slight be necessary through Increasing their rates without at the *ame tine pro Judiclng the open oarket which has boon built up for both certificates and acceptances* To put It another way, it gives the Ifedexal Seservs Backs tho opportunity to establish their rate at or above the market without discriminating against certificates and acceptances* 32io facts are that there are different rates for different kinds of pa$er, lower rates for acceptances and certificates and higher rates for oooiosrcial paper, aad unless the ibderal Be serve Banks ars willing to recognifto these foots It will always be ing>os~ sible for then to get m top of the raarket without operating unfairly against oertlflcates and acceptances* At the present tiros the Ifcderal Is serve rate on line of credit loans is undoubtedly below the market and Just as clearly above the aaxfeet on certificates and acceptances* An increase to 5$ per cent, for exang>let would u»- fairly penalise certificates and acceptances and still not such more than meet the Market on custoiaars1 notes and line of credit loans* Atty increase in rates large enough to put the Isderal Be- serve rate on top of the Market rate on custoraars* notes and line of credit loans would thin operate xaost unfairly against certificates



DECLASSIFIEDAuthority b ( ) / 2 C7 S T

and acceptances and seriously upmt the B»rket for than* securities without giving Ifcderal Be serve Banks a»ch better control over ths genera 1 situation. If, on the other hand, the differential is recognised and different dates established for the different classes of pager, it would be possible, fey putting a higher discount rate on customers1 notes and line of credit loans, to pit Ibderal Be serve rates all around into effective relation with outside rates and thus accomplish what the ifedezel Be serve Banks have been toping to accomplish ever since their original organisation#

The differential between the two classes of paper would also have a direct bearing cm our position in world trade and commerce, for it recognises the popular character of short-time paper like acceptances and would mk» it possible fo finance such paper at m appropriate rate, unprejudiced by the higher rate that mlgfct be applicable to ordinary caauasrciai paper. This would enable our baz&ars and business s»n to compete on more marly an equality with the other money markets of the world, anti facilitate the development of our own market for bills.

Another tiling to be said /or the suggested differential in rates is that it would keep the Federal Be serve Banks on their raeltle, and require them in ail their operations to keep In the closest touch with the market. Both the Federal Be serve System and the Trea*iry would imve to exercise the utmost care to watch azy artificial influences operating In the market for certificates or




aocoptanoos, and to Avoid at all ©ost* any action on thoir own part that

would tend to put either certificates or accept®noes m a tel so basis of

wltae. The markat itsaXf will gift a constant oheck on these thing* If

not subjected lo artificia l influences, and would bo tha best Wot of

w ither the rates were being intelligently administered by tho 1'odaxaX

Bsserw Banks.

AXX of tho•• suggestions a rt, of coarse, more or Xa»s tentatiw and

would haw to bo further dots loped, but I am of lb ring thorn now in tho

light of tho Treasury*s experience in these nattors with tho thought that

thoro may soon bo a real opportunity to conoidor thoir application to tho

dewlc^ment of Ibderal leeerw policy. I hope tho 3bdei»X Beserw Board

will reoeiw thorn on that basis, and gift ooao conoidoration to thoir

poos lb IX it iot in adwace of tho time whon action wlXX haw to bo taken.

Tho torn "treasury cortlfioatoo of indebtedness*, X should add, ought to

bo regarded throughout this Xottor a t meaning otrletly what it says, and

not a t including othor Oowraasnt so our it Us like Liberty bonds or short**

tins Treasury notes* Qono rally speaking, it seems to no that Liberty

bonds ond Treasury notes, not bolng at a ll la tho cla tt of short~time

Treasury certificates or bankers acceptances, and not having tho same

kind of a aaxfcet, woald haw to Jfcll into tho gtne»l classification and

not enjoy any di fib rent fato of discount than eusttastv* aotot and lino

of orodit loans*Sincerely yours,

({ \grn0cl) S. P• Oilfecrti, Jr.

Ion* 35. 1. Crissingsr, 3. ?• 0H3&1T, J r . ,Governor, lodoral Beeerw Board, Under Secretary*Washington, D. 0.



^DECLASSIFIEDAuthority^ ) / 2 ? 5 ~ f

J 3 3

August 2, 1923

Letter, dated July 30th, from the Federal Reserve Agent at Dallas, with reference to conditions in the Eleventh District, and requesting approval of the Board to completing an arrangement with the Federal Reserve Bank of New York to sell #1,232,000*00 of U. S. 3% Conversion bonds to the Federal Reserve Bank of New York on a 4t% basis, with a repurchase agreement, before actually rediscounting with other Federal Reserve Banks. Mr* Talley also inquired whether the Board has in mind any minimum ratio to which the Federal Reserve Bank of Dallas should permit its reserve to drop before rediscounting paper with- other Federal Reserve Banks.

The Secretary was instructed to advise Mr. Talley by wire that the Board will interpose no objection to the completion of the arrangement with the Federal Reserve Bank of New York in the matter of the sale of the U. S. Z% Conversion bonds above referred to, and further to advise Mr* Talley that the Board is of the opinion that the Federal Reserve Bank of Dallas should not permit its combined reserve ratio to drop below 40 per cent, but should at that point apply to the Board for permission to rediscount with other Federal Reserve Banks.



DECLASSIFIEDAuthority &()


o f N e w Yo R K

July 12, 1923.

Dear Governor Crissinger:

It occurs to me that you may be interested in looking over a com

parison of the Government security holdings of the Federal Reserve banks

as at the close of business July 3, 1923, with various other periods during

the past year.

$24,000,000*, and Sales Contracts $16,000,000., the aggregate of the three

amounting to but $94,000,0(K).

The last sheet makes a comparison of the items comprising the earning

assets of the System, July 3, 1923 and April 4, 1923. The interesting com

parison to be made there is that there has been a reduction of $204,000,000.

in holdings of acceptances and Government securities, and an increase in

direct borrowings of $234,000,000., so that while the total earning assets in

the System are up to $1,223,000,000., 75 per cent or more is in the form of

direct loans to member banks. This, I think, places us in a much better

position if it should seem desirable this autumn to recommend an increase in

our discount rate.

You will note that the free investments in Government securities are

down to $53,000,000., Miscellaneous holdings, covering various funds, are

Very *

J. H. Case, Deputy Governor

Honorable D.. R. Crissinger,Governor, Federal Reserve Board,Washirgton, D* C«.


C0?*PARISON OF THE GOVBRfJIEKNT SECURITY HOLDINGS BY KAXUHI1IKS OF ALL KESEHVE BAMKS COMBINED AS OF

JUKE 14. 1922. APRIL 4, p.AY 16, JUNE 27 A W JULY 3, 1923* Holding® on **Heldinge on **#ftoldl8gs on Bolding® ea Holding® osJuno 14, 1922 April 4, 1923 May 16, 1923 June 2?, 1923 July 3, 1923

Certificates and VictoryNote® matured 1922 #323,513,000 -0- -0* -0» -0*Victory Note®, 5/20/23 -0- l7»350 lf,35D -0- -0-March 15, 1923 46,385,500 -0- -0- -0- -0-June 15, 1923 -0- -0- 1,535.000 -0- -0-Sept. 15, 1923 -0- 35*953,500 230,000 26,000 127,000Dee. 15, 1923 -0- 34,011,000 31,909,500 -0- -0-Mareh 15, 1924 -0- 2,062,500 1,967,000 321,500 346,500Treasury Note® 120.599.600 117.550,500 110.624.600 65,88*.100 52,823,100T O T A L #490,498,100 #189,5H, 850 1146,283,450 #66,230,600 #5M96,600

Mi®e. Cfey't Bonds 45,792.000 39,082,910 31,979.060 24,859,580 24,391,630Plttpan Act Certificates 75.500,000 -0- -0- -0- -0-Sales Contracts ...10*471,350 10,626,800 ,42,949.950 16,976,630AGGREGATES #629, 774,850 #239,149,110 #188,889,310 #134,040,130 #94,664,860

♦ Peak of Goyeraaent Beeuri|r holdings ** Date when new Cosnaittee was organised **♦ Figure® used at meeting held at Washington, May 23, 1923


QOTBUMEHT aKCURXTT HOLDINGS OF IS lffilU l RESERVE BANCS (EXCL08XYI or 8AIK8 C0HTRACT8) AS REPORTED TO BBS OPEN MAWCST «Y1I8WEOT OOMfXTIKE

_______________________ AT m s CLOSE or BUSIHESS JOLT 8 . 1923________________________

Bortop flgytoefl

S*pt. 15, 1923 - •O* •0** * 127.000 mQm mQm

Dm . 15, 1 9 » - 4Jt •0» mQm mQm •0** mQm mQm

March 15, 1924 - mQm •0* mQm 321,500 mQm mQm

Trtwrnx.W.tet

Jus* 15, 1924 * 5 # 1*100,000 •0* mQm 6,354,500 mQm mQm

S*pt. 15, 192* - M 1,002,000 mQ~ mQm 2,337,000 mQm mQm

h n k 15, 1925 - *& 920,600 mQm 2,685,200 -0 - mQm mQm

Dm. 15, 1925 - 4 s/Bjl 8,100 mQm 10,607,500 -o - M0*» •0**

bbm 15, 1925 - *ki -0- mQm mQm *0«* mQm •0*

Hareh 15, 1926 - *$f. •o* mQm 2,525*000 mQm -0 -

topt. 15, 1926 - 4 # •0* mQm -o- mQm mQm -0 -

lUroh 15, 192? - 4jjt **0w mQm •0*» 342,200 mQm •0*

D*«. 15, 1929 - 4 #

T O T A L

... •*0WI .........-fi*......

M.030, TOO mQm *16,817,TOO *9,483,200 mQm -0 -

Mifloalluieous 529.000 . . v . M a ____________ SfSiM ..........m jm m 218.410

6RAKD t o m ♦3,559,700 *1,148,950 *1?,36t,000 *10,401,600 *1,340,900 ♦218,430

S 4 SSS it* u u i* la s te Jltx EetiLSL. Saa Fran•!*00 t*%9l•0»' mQm -0 * •0** •0* | 127,000

*o« mQm «»o» #»0«* mQm - 0 - mQm

*0* mQm 2 5 .0 0 0 mQm -0 - 34 6 ,50 0

•0* -0 - 6,000 7,000 -o« 4,525,000 11,992,500

*0» ■ mQm 10,000 2,000 mQm 4, 660,400 8,011,400

mQm 82,300 506,000 5,792,300 mQm mQm 10,986,400

693,100 •0** •0** -0- mQm mQm 11,308,TOO

16,800 •0«* mQm 3.01T.000 mQm mQm 3,033,800

1,063,400 1.018,300 238,900 218,500 mQm mQm 5,064,100

“0“ ■ «0*» «*0« M0«i *©• mQm *0**

•0* mQm *0* 1,809,200 mQm mQm 2,152,400

... . ........... ..mQm mQm 273.800

11,832,300 *1 , 100,600 *760,900 *11,085,800 mQm - *9,185,400 *53,296,600

4.425.600 6,150,000 6. 549,900 T B 1.8» . 1.779.500 mQm

16,257.900 *7,250,600 *7,310,800 *11,867,650 *1,779.500 *9,185,400 *T7,688,230

Reproduced

from the

Unclassified I Declassified

Holdings of the

National A

rchives


1ARKIK0 ASSETS OF FEDERAL REMSHVE BARKS At 0L06E OF BUKCKESS JULY * , 192* AS OOtffARBl «X1H HOiatWg AT WK CIOCT OT W O T M . JH H ..« . *9*1-----

B i l l # 4 1 * « o t » W«t *

Hot chmng«

Affll 4 J u l y 3

B«rt.a m » T » * n ttn n tfrtto si8Zti3B< ^ s s l £ S i s s i H i J M i f t e t t S &g

149,*5455,*09

9,85**

* 2 1 0 , 6 0 *

*59,9**

49,1*0*

160,5519T.988

1*8,93186,585

*52,06*65,6f6

> ,4 * 2 * 4 f , 8 0 4 * 1 3 , 6 1 * *

*20,66$ *112,201 *28,01855,9994*,125

2*,460+

91,02*

* l ,l9 f *T.T51*

120,46629,5*5

9,099*

1*8,159 5*. <05

P » H m t o r r a a q l i o o f t t i l

i119,58333,935

*56, n s 96,9*8

25,248* 14,402* 20,010*

6»5 ,*n929,864

2*4,59**

Aec*ptano*i partluuM* -

Hat ( k O { M

April 4 M r *

S t t w a n t M t a r i t t M - A p r i l 4■ * J

Mat *bMc«

1T.06519,1662,101*

10,1*9*,8*2

6, *05*

Ttttal •undog u m ( i • April 4 T4,556■ ■ • July 3 98,*05

b t *,64**

*9,46*40,101

12,6*9*

]»,8t64,829

18,999-

256,891*04,651

♦f,?60*

28,16919,310

8,859*

*5, ATi t ,*81

8,0*6*

114,1*7114,694

5*9*

51,50625,10*

1,0262,25*

26,1198,144

82,69644,144

I*, 4 0 5,999

2,295•04ft

22526

20,1*012,091

40,95*22,615

259,899198,912

26,40** *1,2*9* 1T,9T»- 11,448* 6,496- 2,295* 199- 8,059* 18,1*8* 60,969-

21,84610,402

1,8411,341

*,542220

* 3 ,* * 11, n r

2#,89© 9,*51

15,13513,399

39,90611,888

11,J»41,999

*9,6199,186

**9,14994,901

10,944- 2,(22* 32,291- 16,619* 1*958“ 24,018* 9,925* 18,431- 144,448-

111,58*122,040

5 4 , 4 * 0

69,*904 9 , » * 4

52,489188,406146,884

64,35369,009

8 9 , 8 9 6

4 2 ,9 2 2

66,286 6?,*19

51,16949,985

125,288 108,T29

1,194,2991,***,499

10,45T* 14,840* *,165* 4 2 , 0 2 2 * 4,656* 5 , 0 4 6 * 1,031* 3,982- 16,559* *9,198*



EXCERPT FROM THE MINUTES OF MEETING OF THE FEDERAL RESERVE BOARD

held June 21, 1925*

"Letter dated June 20th, from Mr, J. H. Case, Deputy

Governor of the Federal Reserve Bank of New Xork, suggesting a

program for the joint meeting of the Executive Committee and the

Open Market Committee to be held next Monday and Tuesday.

Noted.”



T V

FED ER A L R ESER V E BOARDWASHINGTON

x-37^9June 1 6» 1923

SUBJEQT: Foreign Bank Transactions. Discontinuance of Participation by F.R.Bank, Boston,

\\

Dear Sir:-You. axe being handed herewith copy of a letter directed

to Deputy Governor J« H. Case, of the Federal Reserve Bank of New York, which grows out of Boston’s discontinuing its participation in the transactions with foreign banks carried on with the Federal Reserve Bank of New York.

I am also handing you a copy of Governor Harding's letter advising of discontinuance of their participation.

I Kindly let the Board have the views of your Bank promptly $0 that they will be available before the Open Market Investment Committee meets on June 26* r..--— -....

"TSVy truly yours,

Governor\

(Enclosure)



FEDERAL RESERVE BOARD.CQ2I X-37^9a

June l6, 1923 *

My dear Sir:

This will acknowledge your letter of June l^)th ad v isin g of the action of the Federal Reserve Bank of Boston discontinuing its participation in the transactions with foreign banks. The letter of Governor Harding and your letter to him were presented to the Board for consideration. The Board is of the opinion that Governor Harding1s letter raises very important questions which challenge the transactions as matters of doubtful public interest. " ~ "

■Ehe Board is of the opinion that the questions raised by Governor Harding’s letter and your letter are of such importance as to require thorough consideration. You are therefore advised that the Board is of the opinion that the question should be given consideration fct the next meeting of the Open Market Investment Committee which will be held on June 26th.

A copy of this letter is being sent to the Governor’s of all the Federal Reserve Banks for consideration.

The Board would like to be advised, and is requesting each of the Federal Reserve Banks to give their views pertaining to the subject matter raised by Governor?Harding*s letter.

For the information of the Board it is desired that you prepare a statement showing the total amount of free balances growing out of these operations for foreign banks; also the total amount of investments; the kind of investments, and the yield upon such investments, and such other information as will put the Board in possession of all the facts incident to and necessary for a thorough consideration and understanding of the questions involved.

It would be interesting also to have the view of your Bank of the importance of carrying on these transaction for foreign banks, and whether it should be continued or discontinued.

lours truly,

(Signed) D. R. Crissinger

Governor.Mr• J . H * Cas e,Deputy Governor,Federal Reserve Bank,New York, N» Y.



COPYFEDSRAL 22S2RY2 BAL£: OF NEW YORli.

V7. P. G. Harding, Esq.*,Governor, Federal Reserve Bank of Boston,

Bo s ton, Mas s *

Dear Governor Harding:

I have your letter of June 14 in reply to mine of the 6th and 12th ragarding your participation in the accounts of the Bank of Japan and the Bankovni Urad Ministerstva Financi, and note that it is the sense of your boar a that there is no occasion in the present circumstances for your further participation in our transactions with foreign banks. As you point out, your participation in our foreign accounts is entirely voluntary; and we have never had the remotest desire to force upon any of the Federal reserve banks a participation which they did not wish. Our sole reason for offering participations has been to follow out a general policy outlined by the governors several years ago to have the Federal reserve banks act <fi3~~a so far as practicable. As I have and yourself quite fully on this sub j act, I am sure that you and your directors are aware of our views and that it is unnecessary for me to say anything further at this time.

In view of the fact that your bank desires to withdraw from your participation in our foreign bank arrangements, I believe it would be more satisfactory to terminate your entire participation a.t one time, rather than continue it as to transactions in process, ana we will be glad to take over your participations to-day for our own account. We have accordingly arranged with your office to credit us to-day $103,2Ul.o6, being your share of the free balances, and also to wipe out your contingent liability on bills purchased for foreign correspondents amounting to $2,195,S9U.90. We have simultaneously charged your account for the free ■ balance and increased our contingent liability in the appropriate amount*

As to your share of the commissions earned on the foreign accounts in which you have participated since January 1, we will calculate the amount due you and transfer it to your bank in a day or two with appropriate advice.

Very truly yours,

(Signed) J. H. Case

single 'unife in their foreign relations in the r>ast written both Governor Morss

X«37^9b

June 15, 1923.

Deputy Governor,



r COPY FEDERAL RESERVE BANK OF BOSTON X - lIt o c -----

J m e I k , 1923*

Mr. J* H. Case, Deputy Governor,Fed.erol . Reserve Barik of New York,New' York.

Dear Mr. Case:

Your letter of June 6 regarding the participation of this bank in your account with the Bank of Japan, and of June 12 relating to the account you have opened for the provisional bank of issue in Czechoslovakia, were duly considered by the board, of directors of this bank at the regular session held this morning.

It is the sense of our board that there is occasion in the present circumstances for further participation by this Dank in your transactions with foreign banks. There is nothing in the Federal Reserve Act which requires such participation, although it is provided that with the consent and approval of the Ibderal Reserve Board, any Federal Reserve Bank may carry on or conduct through the Federal Reserve Bank opening an account with a foreign bank, any transactions authorized by Section lU of the Federal Reserve Act.

The records of this bank show that its participation in transactions of .the Federal Reserve Bank of New York for the account of foreign banks began 6n June l6 r 1920J with the purchase of bills for account of the Bankof Japan, in which this bank's contingent liability was $l,l6g,000* and its share of the free balance was $292,000. There was no change in these figures during the remainder of the year 1920 but during the years1921 and 1922, your operations were extended to include other foreign banks and the transactions embraced the ear-marking of gold and the purchase of Treasury certificates as well as bills. This bank’s ratio of participation was 7.3$ of the total amount from June-16, 1920, to December 31*1922, but since January 1 of this year, it has been 7«5fc* The following summary shows this bank!s annual averages of the free balance deposits, contingent liabilities, and total commissions paid:

Average Free Balance

Average Cont. LiabH.v Income

1920 $292,000.1921 529,589*1922 326,038.1923 92,215.

$1,16s,000* 2,330,721. 2,3lU,Uo6. 2,3^3^ 96.

0$3,7^2.40 (inc.1920) 3,755-71+

Income to date* . . .$7,^98*1^

It is conceded* of course, that the possibility of any substantial loss in these transactions is very remote, but it seems that the income accruing



- 2 - x -37^■jo

to this bank as a result of its participations is small and not in proportion to the amounts involved* A participation in a purchase or loan returns a proportionate share of the discount or interest paid, but our participations in your foreign accounts, while carrying all the risk involved in a purchase, give us only a share in a small commission.

The directors of this bank feel, that looking at the matter purely from the standpoint of income, it is not good business to permit it to have these contingent liabilities. Their approval of these participations in the past has been actuated by a desire, to cooperate with the other Federal Reserve Banks in transactions which were represented as being in the public interest, and which in the circumstances then existing seemed likely to involve contingent liabilities which had better be distributed among all Federal Reserve Banks rather than assumed by one bank alone. There do not at £b£ present time, however, appear to be any considerations of a public character requiring this bank to continue to participate in accounts opened by the Federal Reserve Bank of Hew York in its own name and upon its own initiative with various foreign banks* The conduct of these accounts is necessarily under the sole management and control of the officers of the Federal Reserve Bank of New York* Your institution is the sole beneficiary of any collateral advantages which may accrue from these banking connections abroad and bears the overhead expense of transacting the business. There is at present no strain upon the Federal Reserve System and the directors of this bank see no reason until conaitions change why it should share in the profits or bear any part of the losses -vhich may grow out of your transactions with your foreign correspondents*

In any large transactions impressed with a distinct public interest such as the ear-marking of gold with the Bank of England in June, 1917; "tKe de- \ posits you held for the account of the Bank of the Nation of Buenos Aires, 1 which involved their payment in gold within a certain time after the end j of the war; the ear-marking of German gold with the Bank of England in IJune, 1919; and the ear-marking of gold with the Bank of France in S©pt- \ ember, 1920, the directors of this bank have cheerfully agreed to a — Jparticipation, and it is their intention to participate in any similar transactions which may be engaged in hereafter.

In view of the foregoing, the directors have instructed me to aavise you that this bank does not care to participate in your arrangement with the Czechoslovakian bank, ana with respect to your accounts with the Bank of Japan, Bank of England, Bank of France, de Nederlandsche Bank, Swiss National Bank, and de Javasche Bank, in which this bank has been a participant, to give notice of cancellation of participation agreements hitherto made by this bank except as to transactions in process.

With assurances of our appreciation of the courtesy you have accorded us in all these matters, I am,

Very truly yours,

(Signed) W* P. G. Harding,

Governor*



A

7

U . 1923.

\

V *

If '&** m w $

l m to xdol^t at

, W log lug * coyjr or a tet-tor wittoj% dovorfiar Itarri* la fto se tter of tho

0£«K3 t*aaco»tlc«» us ooj?tr©Xl*d b j t l * gg*a

i i m m 1 M « W a o m n t M , ^ m*.

&Q«ri»* 3#ti*r si© w«y !»t*wretto&.

If te jmu* am rmtmm ts&icli twx

!**» «rU%<%*. at absmt eeaoorttfcttg Urn OpenJ M t e t tranaaet&m* seÊt&r® turUm- cojîiteriszim

3rm. «** IBmap to taring t&usfe up m Urn masto

of t&* O p m ftMMt&aat QmzzHim to

t& lidlii oa 58S,; with the Board#

*- u* in** ôu of w§ 0tmt mmm* i m*f ory tn&jr | « « %

S r. 4 . H, Ottw, (Signets; ,. aapaty as^raor* M r Turk, m » f *

l>» R. wriÎng®^



<


held June 16, 1925........ .

"Telegram dated June 15th, from Mr. Case, Chairman of the

Open Market Investment Committee, advising that a meeting of that

Committee will be held in Washington on June 26.

Noted with approval.”



THE UNDERSECRETARY OF THE TREASURYWASHINGTON

Jane 11f 1925

My dear Governor:

In riew of oar previous correspondence

about purchases of acceptances by the Federal Re

serve Banks, I am sending you herewith a oopy of

my l e t t e r of June 9 , 1923, to Mr* Case of the

Federal Be serve Book of New York, togeth er with

a oopy of the tabular statem ent accompanying th at

la t te r *

Very tru ly yours

S . P. GILBERT, J r . , Under S ecretary .

Eon. D. R. C rissin g er,Governor, Federal Reserve Board Washington, P . C.

2 enclosures



3m * 9, 1933,

/

Baar Hr. Caaas^

In r im of ©w previous eorraapondanea about purobaaaa

of aoeaptaaeaa by tba iadar»l Iaaarva Bankaf I an a*nding you

barawitb a copy of a tabular atataaiant praparad by tba 3setion

of Stotlitloi 9 abowing tha aaorota of acoaptancaa bald by tba

fadarsl Baaarva Banka aa eonptrad with tba total mmmt* out stand*

ia« on various datas. th li abowa tbst tha ratio of Mila bald by

tba ?edar»l Baaarva Banks bis inoraaaad fro» 7 par cant in tbs taid-

dla of 1931 to About 50 par oant at tba prasant tima. Tor tba nost

part this baa takan plaos during a pariod whan eoauarcial banka

wara to an unuaually atrogg poaltion and wara in fact tasking in*

vastmanta for surplus funis.

X cannot ascapa soma fasling, aftar looking at tbaaa

figuraa and tba raeord of tba buying rata for aeoaptancaa f tbat

tba wbola oattar of aeeaptaaea purobaaaa ougbt to ba studiad fur-

tbar at thia tima, and tbat In tba paat, at laaatv tbara baa bam

quita j* pronocnead tandancy on tba part of tba fadaral Baaarva

Banka to %uraa* tba accaptanea narkat, arm at tba axpanaa of tba

ganaral or adit polity of tba Fadar*l Baaarra 8ysta»« It la a$an

to quaation wbatbar tbis h*»a# in faot, baan good for tba daralop*

mant of tba aeeaptanea markat, wfcieb aftar all abould atand on ita

om fast, and in any avant i t abeuld not ba forgot tan. aa you bava



♦41 *

rocontly point** m%, tl* *alo of scooptonooo to tho fodorol

tooonm Boils « p m tn for practical pnrpoto» oxactfcy Ilk* tin &!•*»

comttng of jrnpor *t tho fodorol Botorro Baafe*, I t i i onathor

wmxm of aeeos* to th* ?od*r*i Booonro flfoton, *«d It tim id bo

tro*t«d accordingly,

?ory truly jrcmrt,

(Signed) S. P. Gilbert, Jr.

S. P. QXLBlffiT, Jr,, tfcdcr 3ocr«tary.

J , H. 0am, Bo$., Acting Governor t fodor&l iM trro B*mk# Kow Torkf H. Y*.

I oncloouro.



Sstlmated amsfc of bankers9 acceptances outstanding on various dates from December 31# 1919, to A^rll 1, 1923, ooiqpared with the amounts held by the itedaral Bb m t o franks*

Hatsiist lasted

amount outstanding! a)

Amount held bQr held ty Jtederal Be serve Banks(b)

Estimated amount Batlo of amount outside of Jtdexal held by tfetferal B*s«r?* Beaks He serve Banks fc.

total out stand-*

see* 31. 1919 $773,000,000 $078,000,000 $1»»,000,000 74«4${

Apr* 1 , 1920 799,000,000 424,000,000 376,000,000 53.1^MT 4 , 1920 612,000,000 410,000,000 402.000,000Jane 301 1920 812,000,000 390,000,000 422,000,000 « .0 *Bor* 16, 1920 769,000,000 288,000,000 461,000,000 3TJ6Z2)so* 29, 1920 709,000,000 266,000,000 468,000,000 36.1£

Apr* 1, 1921 644,000,000 122,000,000 622,000,000 1«.»*Jane 90, 1921 043,000,000 32,000,000 5X1,000,000 5.9J$Deo* 31, 19a 474,000,000 114,000,000 360,000,000 24.i£

Apr* 1, :1922 416,000,000 103,000,000 313,000,000 !*••*Jane 90, 19 22 420,000,000 154,000,000 264,000,000 36.7^Deo. 29, 1922 £02,000,000 246,000,000 266,000,000 *8.0£

Apr* 1, 1928 324,000,000 260,000,000 264,000,000 49.4JJ

(a) figures for April 1st of eaoh year are estimate* of tte American AcceptanceCouncil and for intermediate datoo the estimates are derived by Interpolation based on ths changes In the aooept^oe liabilities of all member banks*

(b) fotal holdings of bills purchased in the open n&rket on the nearest date*Includes a few tmu* acceptsnoes purchased, but does not Include bankers* acceptanoee discounted*

\/ '-o

^ M"CSVmMmdqXdqsSd jkljb* betn'x

prepabisd by tbb ‘jKCfioR of aM -sf ics,TRSLUSUBY DSp.lJflfcSOT* Jfcue 8, 1923*




o f N e w Y o r k

June 1, 1923.

My dear Governor Crissinger:

On behalf of the Open Market Investment Committee

for the Federal Reserve System, I acknowledge receipt of your

communication of JSS£_ 51, 1923.

I am forwarding to my associates on the Committee

a copy of your letter, and will communicate with you further

in due course of time.

Very truly yours,

J. H. CASE,Deputy Governor.

Honorable D* fU Crissinger,Governor, Federal Reserve Board,Washington, D. C*



\3 3

copyFEDERAL RESERVE BANK

OF NEW YORK

May 51, 1925

Open Market Investment Committee for the Federal Reserve System

CONFIDENTIAL

S i r

I am sending you herewith a copy of the minutes

of the meeting of the Open Market Investment Committee

for the Federal Reserve System held in Washington,

D. C., on May 25, 1925, as approved by the members of

the Committee.

I am also enclosing a copy of the letter sent May

28 to the Governors of all Federal reserve banks with

respect to the basis on which to effect the sale of

$50,000,000. of Government securities by the System.

Respectfully,

(Signed) W. B. Matteson

W« B. Matteson Secretaiy of the Committee

Honorable D. R. Crissinger, Governor, Federal Reserve Board, Washington, D. C.

Enclosure (2)



0~0-p

Open ricet Investment Committee For the Federal Reserve System

May 28, 1925.

0ORFIDEBTIAL

My dear GovernorReferring to the letter written you by the Secretary of the Open

Market Investment Committee on May 28, 1823 accompanied by a copy of a reso

lution adopted at the last meeting of the Committee dealing with a suggested

sale by the System of $50,000,000 of Government securities, I believe that

a practical and equitable basis on which to effect this liquidation in

Government securities is as follows*

As some of the reserve banks have no holdings in Governments and

certain others have expressed s. desire to retain their investment holdings of

short-term Treasury certificates of indebtedness, the sales made will for the

most part oonsist of Treasury notes (preferably those selling at a premium) \/'

except in those oases where banks are not carrying any of the latter in their

portfolios. With this in mind, I am enclosing a statement showing in detail

how an equitable distribution of $50,000,000 of the Government securities

held by the System could be effected. The face amount of securities to be

disposed of by the various banks is in proportion to their total earning

assets and in oases where banks do not hold all or *my part of such proportion

ate share in Government securities, the deficiency is necessarily made up from

the holdings of other banks. However, in order to assist in carrying out the

program the lev York bank, which does not hold any Government securities, is

willing to give up from its portfolio of bills such amount of bills as is necessary



Page I8/28/13

to replace the sales Bade by other banks in exoess of their quota, to wit* 118,519,700.

In view of the Committee** reoonaendations will you be good enough to wire se upon receipt of this lsttsr stating the particular Issue or Issues of Government aeourlties that you prefer to sell at this ti»e, and, if you so desire, the Coralttee will be glad to assist in the sale of suob seourltles as you say designate.

Very truly yours,

J. 1. CASEChaira»9 , Open Market Investment CoBwittee


STATEMENT SHOWING BASIS UPON WHICH $50,000,000 GOVERNMENT SECURITIES __________ HELD BY ALL FEDERAL RESERVE BANKS ARE TO BE SOLD__________

Proportionate Amount To Be Sold

Baaed on Earning Assets

Actual Amount of Government Securities To Be Sold Based On

Holdings of Government Securities

Excess Amount Required To Cover Deficit (to be replaced with

______ Bankers Acceptances)

Boston | 2,750,000 $ 3,060,400 5 310.400

New York 10,600,000 -0- X

Philadelphia 4*800,000 7,422,800 2,622,800

Cleveland 5,o5o,ooo 6,990,000 1,940,000

Richmond 2,850,000 150,000 X

Atlant a 2,500,000 280,300 X

Chicago 6,200,000 8,124,400 1,924,400

St. Louis 2,450,000 3,381,200 931,200

Minneapolis 1,750,000 1,905,200 155,200

Kansas City 3,350,000 7,292,000 3,942,000

Dallas 2,450,000 2,962,150 512,150

San Francisco 5.250.000 8.431.550 3.161.550

TOTALS 150,000,000 4 5 0,000,000 *15,519,700

x New York holds no Government securities; Richmond is short ^2,700,000 and Atlanta is short $2,219,?00, making total $15,519,700 sales to be spread among other banks which sales, may if desired, be replaced by bankers acceptances from portfolio of Federal Reserve Bank of N e w York.




o f Ne w Y o r k

June 11, 1925.

My dear Governor:

Since June 11 when I acknowledged your lettar of Mav 51 land advised you that cc pieErweTB being sent to members or,,,:tlie" dpen^Market investment Committee, I have heard from each of them and find that each received the letter with the same surprise as that which I had expressed to you in our telephone conversation on”June

The facts are as follows: Early in May it was suggested that the Open Market Investment Committee should have its next* meeting in Cleveland on or about June 25. Tbe Board was advised of the proposed meeting and on May 9 requested that the meeting be held in Washington as there were some other matters which the Board might like to discuss with the committee. At about the same time the committee decided that an earlier meeting would be advisable, and this meeting the Board arranged should be held in Washington on Wednesday, May 25. At this meeting the first act of the committee, all the members being present, was to advise the Board that the committee was in session and to inquire if the Board had anything to communicate to it. The Board replied that it had nothing to communicate to the committee. Toward the end of the morning I was called into a meeting of the Board to discuss a currency matter, and while there I stated to the Board that the committee was proposing to recommend to the Federal reserve banks the sale of about $50,000,000. of Government securities.This statement was received by the members of the Board without comment. A resolution to this effect was finally adopted by the committee. Late in the day and towards the end of our session, Vice Governor Platt attended our meeting but expressed no dissent from the program we had adopted.

The surprise of the members of the committee arises out of the fact that a few days after our meeting, the Board having been fully advised of our action which we felt was in entire accord with the letter and spirit of the Board’s letter No. X-5689, the Board should not only express disapproval of our action but without opportunity for discussion should in substance direct the committee to take action to dispose immediately of all the remadriing Government securities held by the banks. ~~ ~ " “

The Open Market Investment Committee succeeded the "Committee of Governors on Centralized Execution of Purchases and Sales of Government Securities." This committee functioned for about a year and had several meetings in New York, Cleveland and Boston. At nearly all of these a member of the Board was present throughout, Messrs. Platt, Miller and Mitchell having from time to time represented the Board on these occasions. The presence of the Board member permitted, through discussions of policy and of market and credit conditions, the development of a program for recommendation by the committee on which the Board and the committee were in full and harmonious agreement. The new Open Market Investment. Committee had assumed that the same relationship would prevail in connection with their meetings and work. The members of the committee hope that at its next- meeting the Board will be represented throughout as in the past, that they

3 W P



F E D E R A L R E S E R V E BA N K O F N EW ......... 1. HoD# D. R. Cf - 5 / l l / 2 3Washington, D. C.

may then have the opportunity of discussing with the Board its views concerning the disposal of the remaining Government securities, and that the Board will give the committee its opinion as to the manner in which such a course would accommodate commerce and business, and affect the general credit situation, these being the principles by which, under the Board’s resolution, open market operations should be governed.

Your letter of May 31 requests me to nadvise promptly of the sales of the Government holdings of the various banks, and to what extent each of the banks contributed.” I am sending you herewith a statement showing in detail the holdings of Government securities of the various Federal reserve banks as at May 23, 1923, amounting in the aggregate to $140,788,000. exclusive of about $31,000,000. held as misecellaneou8 investments for self-insurance funds, etc., and about $15,000,000. held under sales contract. Appended to this statement are the quotas for sales which the committee has suggested to the respective banks, and the amounts sold up to June 8, 1923. As a result of the sales already consummated you will note that four of the Federal reserve banks, namely, New York, Richmond, Atlanta and Dallas, hold no Governments except fluctuating amounts of securities held under sales contracts, and nominal amounts of miscellaneous long-term securities held as investment for certain special funds.

Governor Horris of Philadelphia, a member of the committee, has just sent me as its chairman, a communication upon this subject, copy of which, with his permission, I am transmitting herewith.

Very truly yours,.

a t t / )

Case /Ends. (2) Chairman, Q£en Market Investment

Committee for the Federal Reserve System

Honorable D. R. Crissinger,Governor, Federal Reserve Board,Washington, D. C.


issued Holdings of the National Archives

m - im m m mm of h i u m

925 Chestnut Street

0 0 P 1

Jun* 0 th, 1925

Ur. J . a , Case, Chainaan,Open Ktrlwt Investment Ooanlttee of ths Federal Beserve System,

Federal E t i tm Bank,lew fork City.

My dear Mr. Case*-

Governor Crisslnger*s lottor to you under date ofKey 81st, ettich, in accordance vltli his expreseed desire, you here brought to tbs attention of the Federal Reserve Bank of fhiladeljphia, was oarefully oossidered at the semi«*outhly meeting of our Board of Directors on Wednesday, the 6th instant , and X aa directed to reply as follows*

Governor Orissinger*s letter may propsrly be consideredin two aspects - f irs t, as it affects the Federal Heserre Bank of Philadelphia directly end exoluslvely, end secondly, in its broader or national aspect♦

fo take up the former aepect f i r s t , about a year agothe discounts of this Bank had fallen to a point which left us with veiy considerable funds tensporarl ly unemployed . fhe volume of di as aunts « s constantly shrinking* It was the judgment of the Board that this shrinkage was likely to continue for some Use, and that ths 6§$ of our deposits which we are at liberty to use would emble us, fra* that source alone, to sect an? demands idiich cur mother banks night make upon us within a period of two or three years, this Judgsent, I may add, has thus far been verified, the low point in discounts was not rcached until August* 1922, and there has never sixes been a time *ien our di scounts mounted to

of our deposits.

fhls judgment having been reached, the next question fordecision was Aether aU the rest of our resources Aiould remain idle and unproductive, or whether we were Charged with a duty to employ them. I t would unduly prolong this letter to recite the considerations ehlch led us to tbs latter conclusion. Suffice it to say that we did reach It, end that we bave nsver regretted it , nor seen any reason to think that we made any mistake .


Reproduced from the Unclassified I Declassified H hidings of the National Archives

fjbiebal msmm mm oy phiuj>blphu

Jtoge Ho. Z To ur, J # H, Oase

me third question was the arn&unt of funds which should be ewgployod. W decided that we might properly purchase government securities to an amount act exceeding our free capital and surplus. At the present time this investment represents only about 80J& of our capital and surplus act already invested in building*

•Sm last questlm m s the nanner c f soqployawnt, Bankers* acceptances were then selling at and Relieving that this rate was unjustifiably low we were wore disposed tc c tr ta il our purchases than tc increase then. Ihls le ft us only govenwent se- ouritloo* m deeiasd i t better iftserve Banking policy to buy shortterm notes than long-term b«sds# As between short-term Treasury Certificates and longer term Treasury notes 9 we chose the la tte r for three reasons - (1) because they paid a better rate , (2) because their purchase did net involve competition with member banks, and (») because we thus avoided the necessity cf reinvesting tie proceeos of frequently maturing Certificates* our purchases wars made slowly, without advancing Hie price of the lotos, we only bought part of wint was offered tc us by mmaber bank® or dealers. Atjno tins did we make any bid, or place any opea-garket eider .

Having exercised our best Judgmsnt in making these purchase*) having seen cur Judgment tin* f&r verified! and observing no injury that ha* resulted either to the Treasury Department or to the business and commerce of the Hat Ian, we_are reluctant to dfspeeo of these securities, or any of them, particularly a t a heavy loss, wmeh l o l i l a i b« avoidsi by »Inq?ly h o l d S T t c ’W B S fH n u T m r * * A that four Board consentea to the sale of our prepcrticn of |60«000,000 only m t of a dee ire tc meet, as fior as possible, the desires of the \ Treasury department, and respect for the unanimous recomaendatlon cf I the Committee* 1 m s directed tc advise you that the Board reserves \ fa ll liberty and dlsorttion to diss*nt from any futoo reoaamenaation ! which tfce Ocwalttee may maJce*............... .. - — -..-..- ..- —..-.........

As to the broader aspect cf the quest Ian, 'i&e Board noted wife seme surprise the references in Oovemer orls*ingerfs le tte r to "the policy of the (isserv*) Board, * "the Board** determination,* and the desire that you should call the natter tc the attention of the Banks "in order feat the policy cf the Board may be carried out In its en tirety ," While tho Federal Reserve Act does provide that purchases of government securities mad* by th* Banks shall be subj act to such rules or regulation* as the asserve Board may prescribe, we are not aware of *ny rules «r regulations which the Board has ever prescribed on this subject, nor do we find in the Act any power given to the Board tc prescribe any rules as to the sale* of such securities, or any power to impose upon tie Directors of the several Satfcs a policy on this sub* Jeot which is a t variance with their own Judgment. Such a power, on the contrary, would seem to us to be utterly inconsistent with a ll toe


u p .d/c ~ ~......Reproduced from the Unclassified / D g ^ g p lifd Holdings'^ the National Archives

4 * u r n o f m ~* %w ~k

W fr i T o M r . J . 1 . O a i i

otho* provisions of III* io t9 and would create aa impossible sltaat- tloav laasaueh as It aoald vest responsibility 1st om frotap aad pomr la another group. There can be no doubt that the Federal assorvt System l* aBfglonal Coatr&lbaalrtng iiystca, aad tho Actexpressly provides that «mK Bank shall be conducted under tte "control" of a Board of M*ec*orst which shall "porfor* tho duties usually appertaining to tho offleo of directors of banking associations".

It Hal been aad la tlia wish and policy of tho Board of this Bank to do o very thing possible to neat tho views of tho ffraacaiy B*~ partiaent aad of tho federal Reserve Board on all natters, but It la fait that attoatloa should bo called to tho faot that this willingness ■act not ho construed as a willingness to surrender tho poaers expressly conferred >y tho A*tf aad naturally attaching to tho degree of rospo»~ slblllty ahlch Dlreotora of lesarva Banks accept for tho aaaagaaaat of their Mfowl institutions.

I a m 9

Ifery truly yours#

{Signed) Qoo. w. Vorris

Ooveraor.



wcopy*

May 31,

Nty dear Mr. Cases

This will acknowledge receipt of your letter..of— Maz..25U inre the report of the Open Market Investment Committee for the Federal Reserve System.

You are advised that the report has been presented to end considered by the Board. The Board notes with some surprise that-, in the resolution of May 25, 1925, the committee limits the sale of government security holdings of the various Federal Reserve banks to.ISQÔOOÔOO, which is pro-rates among them. The limitation of the saTe~~oT these securities to the above amount is foot in accordance with the policy of the Board. The Board sees no reason wEy~tHere should be any limitation.

Your attention is being directed to the Board's determination that these government securities should be disposed of as rapidly as possible until all are out of the banks. At the earliest opportunityîFTsêsired that you bring this to the attention of the Open Market Investment Committee and the various banks in order that this policy of the Board may be carried out in its entirety.

You will also advise promptly of the sales of the government holdings of the various banks and to what extent each of the banks contributed. It appears to the Board that the time is propitious for the disposition of all these securities, and the Board trusts that you will immediately take action to dispose of the governments, having due regard, of course, to market conditions.

Kindly let the Board be advised at your earliest convenience.

Very truly yours,

(Signed) D. R. Crissinger,

Governor.

J. H. Case, Esq.,Deputy Governor,Federal Reserve Bank,New York, N. Y.

LSee ans 6/11/23 See ans 6/1/25



.OF THE TREASURY

May 30, 1923*

My dear tiovemonwith farther

reference to the open market operations of the Federal Reserve Banks* I have already seen a oopy of the Open MarKet Committee’s report and agree with you that it is not wholly satisfactory.On the other hand it Qonmdts the hanks to the immediate sale of $50,000,000 of their holdings of uovernmsnt securities, and that means substantial farther progress in the liquidation of their position* I understand from the Acting Chairman of the Committee that it is the intention to make the §50,000,000 of sales out of the treasury notes held by the hanks, and 1 am inclined to believe that when this has been accomplished farther sales can he arranged in connection with the June 15th operations of the Treasury. The Treasury is prepared, for example, to take over on June 15th sub

stantiality all of the December 15th treasury certificates held by the jfederal Reserve Banks, and if §50,000,000 of treasury notes are sold between now and June 15th the Treasury would be quite

prepared also to tate over for retirement between June 15th and June 30th the remaining Treasury notes held by the Federal Reserve

Banks. I should be inclined, therefore, to accept the report of the Open Marlcet Committee for what it is worth and then to work



- - z -

out the liquidation of the remaining securities around the

middle of June, arranging th is, i f possible, througi the Com

mittee, or if the Committee does not act in the matter, through

direct action by the Federal Reserve Board.

Very truly yours,

S. P. GILBERT, J r . , Under Secretary.

Hon. D. R. Cr is singer,Governor, federal Reserve Board, Washington, D. C.



May 29. 1«er

"Letter dated May 25th, from the Deputy Governor of the Federal Reserve Bank of New York, Mr# Case, enclosing a copy of the last report of the Open Market Investment Committee for the Federal Reserve System,, and a copy of a resolution adopted by the Committee covering the sale of Government securities.

Ordered circulated. The Governor was requested to secure from Mr .Case information as to the date upon which it is contemplated that the sale of $50,000,000 in Government securities by the Federal Reserve banks will be completed, and also a report of the sales as they are made from time to time, together with information as to which Federal Reserve banks respond to the quota assigned to them for sale by the Committee•"



3 3 3

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four Xettaj* to Qmmrmrn mad -I oa t&at yea Jm*©

so ivrlttoa Sr* c w *

I H ilit ym hmm Jurnt Itom hm M i * <*P5T **

tto*» Qpn KMflwt 5«bI4I»®:#« m&m%* I *» aart a* all

#S£l9£l6& gQpSMtlf* tlfe© 3*0'j>Ggft * A IJsalt&tlO?*. #tf 42*0“

sale®. to IflOgOQ wiMi to sMi t# *© iar©»iS In

1 steM lias» to hmm jpwar tS***# atoe&t ***

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■ (Signed) D« ft, Criselnger*

non* &• !»*■Und raecretar .«t t&« Swtwtoiy#IMK&ngUfe*. &*■ C#-




held May 15, 1925.

"The Governor was further requested to advise the Committees

of the Federal Reserve Bank Governors on Open Market Purchases and

Voluntary Services that the Board desires them to meet in Washington

on May 25, 1925, at IOiOO a* m*n




held May 8, 1925.

"Letter dated May 4th,\ from Mr, Case, Deputy Governor of

the ^federal Reserve Bank of New York, suggesting that the Committee

on Open Market Operations and the Committee on Voluntary Services

of the Federal Reserve banks, hold a meeting at Cleveland, Ohio, on

June 25th.

Upon motion, the Secretary was instructed to advise Mr. Case that the Board wishes the meeting referred to, to be held in Washington on June 25th, Mr. Platt voting ’no*,11

£



copy FEDERAL RESERVE BANK ^

OF NEW YORK

May 4, 1925.

S i r e : Attention: Mr. Platt.

Receipt is acknowledged of jrour letter of April 25 in regard to a meeting of the Committee on Open Market Operations and the Committee on Voluntary Services of the Federal Reserve Banks. I had thought that we should have another meeting of the Committee on Open Market Operations by about the ^nd of June, say- the 25th, and Governor Fancher has suggested that it might be held in Cleveland* Assuming that you or one of the other members of the Board would like to attend the next meeting of this Committee, would it be agreeable if we set the date tentatively for June 25th. If so, I will communicate with the other^ members of the Committee to see if it will be convenient for them to meet in Cleveland on" that date.

I understand that the Board thinks well of the idea of having a meeting of the Committee on Voluntary Services of the Federal Reserve Banks held at the same time owing to the similarity in membership of the two Committees, and, if the Board approves of the proposed date, I will, as you suggest, invite the other member of the Committee on Voluntary Services to go to Cleveland at the same time.

Respectfully,

(Signed) J. H. Case,

J. H. CASE,Deputy Governor.




Boa. 8. V. Oil»#r^ Jr.-_3

ara gnkU»lljr •tsadlljr 8#Ulz« on tha Uoafc. <k tha Tal.rul Baaen.Bank, and I ballava that a study of ttomnfcar of hank. r#dl Mounting would show that there hae been a eirailar increase in other districts due to the spread between federal reserve rates and roarket ratee*

Mr. Warburg, at a recent conference with the Board, took the ground that w* eggftanot to push the liquidation of open market paper much further unless we were doing it for tha expreee purpose of creating a situation **dch would make necessary tha raising o discount rates, and it has been stated in Board discussions, I think, generally by Mr. Hamlin, that the traditional central bank policy with regard to open market operation is to sell paper after the * / rates have been raised rather than before in order to make the increase of ^ rates effective. !e are reversing that process and it is obvious that if you push it to the extras* of getting rid of all or nearly all your open market paper you have Jest that weapon entirely# There la the farther point that you cannot operate the federal Benerve Syetem with its twelve distinct /regional banks exactly aa if it were ajsgntr&l frarikiBgJ>yet08u It never was v intended to be so operated and if we should push the ®at$*r-tn thi extreme very likely we would have a good deal of trouble with the boards of '‘tractors and bank managers in my opinion, and generally peaking tha? are a pretty high type of nan#According to Mr. Case and others ifco are in a pretty good position to know the purchasing rates of the federal reserve banks for bankers* bills cannot be raised much more without driving bills out of the Market unless the Heserve batik discount rate itself is raised# A possible result of pushing this matter too far will be. I think, feo arlve the federal reserve banks into Investing v in snxnicipal warrants which were one of thalr main sources of revenue for % tllue before the ar. This it seems to aie would be undesirable and I can see no reason whatever shy tsanicipal warrants should be preferred to tJnited States securities, though tbey are undoubtedly reasonably liquid and have a fairly high yield.-i do not mean to say that we have actually reached the limit of liquidation of bills bought In the open matket. There were $374,000,000 of such bills on April 35th and only $82,000,000 on April 36, 1933, but the difference I think Is largely to be accountei for in the greater volume of bills outstanding due to increased business. Sena of it is due to the activitiee of the co-operative marketing associations which have been financing themselves to a considerable extent with acceptances# So far as holdings of government securities are concerned X do not eee-*|$\3||*her froa a Treasury or a federal reserve standpoint the liquidation should go tt»eh further at present unless the Treasury has surplus funds *hieh it desiree to inveet with as little disturbance to the market as possible. |t seeae to me it simply puts up the r&tee on itselfjoa^ necessarily by mnhlri federal reserve xigui latxon: to tKI~~extrsino. and ^rHea has beentfcatfOB# limit |; ~$«rhsf>s relatefl&o the capital and surplue of the federal reserve bankav might be recognised ae normal and as a part of the demand of the general market.

Yours very truly,S

Acting Governor.w m n r n ^ m m m m e t i ' s m . ,

Ubdar Secretary of the Treasury.Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


April 38, 1933.1 - 1

Ifcar Mr, Cfclbert*At soae ilae sben uni both hareopportunity to aisoass raattars a

little I to talk otar with yom the questions raised i» wr let tor ilJtelLSPk ***** relatie© to the present holdings of Treasury i»i««»ad ojrtifioatee |b federal Desarvs %eten, and yotxr smswer of tint 3*th. I t eeeas to m that so far as the oapltal rat surplus oftbs fedaral reserve bardrs are concerned they constitute a fund *bicb

the JoaiU&lo fiasd* Of the cearaber banks add if not Invested represent that sarah son tract ion. $hte fend 4ees set represeat all the contraction by any aaaaa eaaeed by the freieral a»serfe Sestets with it* present ae*Gberefcip bat of that I shall say sei»ethi**ilater. I» put tin* back into the oarbit vhofeher thro igh rediscounts or through direct investments Jfep- sea equal to their capital and surplus U w flMoral reserve *bax&* do not add anything not previously attracted bat siapiy put the market in 3 tat*. qtio, ffcerefora, it eeecas to no that up to th*ir ;saj>itsi anl aorpins ~ froa *hiob yoo aright perhaps subtract tbs* iava*tc>e!3ts in buildings • the Federal reaerva batiks operate Jast ix»eUf aft any other banka and say bo ootisida?**! a part of tha g«s*t&rai aarket. % own view ha# «!• may# beea that a considerable part of this fund tdqht wall bo invested ia long term bonds, and I think it mat a clearly the original intention of the founders of the Ited »r»l Besarve Spate* that the banks shoold carry a eeasldermble a&ouat of $ por cant bonds, ba ?ad on tiie irpectatlon of absorbing tha bonds bearing the circulation privilege end converting the® iiito 3 per cents, Hr* Kitchell has always agreed. with ate or this point so well as aoa® of tbs Oeôrnoro of Utetoral roaarv® banka with vtfcom I bars talked ovor tb» mtt«*r froa tine to tlm m

Hdw as to tb« go coral era lit polioy of tbs ffcdaral reêrvo banks it is truo, as you kaxn said: *In tha aboanoo of any lnaraaso in tbo H«eouit rata faarthor liquidation of opac itarkat p rtshaaas of fora ths only opportunity of atarelsi&g control through tho l doral raaorta basts.* fhata is no doubt I think that the liquidation of Oovorraasnt n#(mritiasP now amountiasj to < 0,000^00, bat tmorelsad a dagroo of ocmtrol by forcing hiisjhar ratoa-to ^!U2attoiwrsj^ ^«<^lni~a~c6Btrra5?5#~of^ôradit, feoiwivar, this can bam only one of foot and that is to forco hlghar dlsaomt rates upon the federal reserve barike la tibo long rtja beoauso its tendency is to inoteate atoaJily tha spread betweea Jlsdefal reserve m tos Mid rates that trastoaars pey tha taeo er banks, this in tarn tenets th*



THE UNDERSECRETARY OF THE TREASURYW ASHINGTON

.lay 25, '

My dear Governor: ^I am enclosing for your information a copy of a letter

of this date which I have sent tc Deputy Governor Cage of the

Federal Reserve Bank of Now York on the general subject of deal

ings of the Federal Reserve Banks in hankers acceptances. I

understand this subject was discussed at the recent meeting of

the Committee of Governors can Open Market Operations and I have

written Mr. Case in accordance with his request for an indication

of the Treasury1s views as to what policy should he followed in

these operations*Very truly yours

S. P. GIT3ERT, Jr., Under Secretary.

Hon. D. R. Crissinger,Governor, Federal Reserve Board Washington, D. C.

1 enclosure.



May m , 1933,

Bear Mr, Cute;

following ovar conversation of the other 1* 7 I have beaa

giving «<»• further thought lo the ijuettion of ©pan m r M dealings

in tanker* accept*toot*, fitli thsir holding* of Gorernejent *e<rurltie*

practice lljr U n d ated * tad perfcsps eoKpletely liquidated hy the end

of the next month, the federal Beserve Banks will have practically

a© investment* except their holding* of dltcoiantad paper mid the

tankers acceptance* fco^ht in the open Market, Binder jretent con

ditions, and with a a i* count rate that i t generally below the aarktt

ra te , ttoi federal Beterve Bank* arc not in a pot it ion to excroise

much control over the aarket through the dieewmt rate,end in the

absence of se»e increase in tbe disccrnt r»t» i t it therefore per*

ticularljr t*port*&V, i t teesi* to w», that doling* in hankers ac~

ceptmices 'bo governed hy money «d orodit condition*. TM* i t is

difficult to do if tho federal Beserve Banks t t i l l adhere to the one-

tided policy which tei heretofore heon followed with rcspect to hanksrs acceptances, % to date the polio? has clearly been quite

contietcntly t o buy buft never; to toOl acceptance*, and at a ll tines

to nurse the wwrkst for acceptance* rather thou to lot it stead

on its own foot f For this there at? have been tome excuse ia

the beginning whae banker* acceptance* were new tad bad not been developed, ta t even hoforo now there here been occasions, i t *ecns



-3-

to a t , whon parohasss of banksrs aecoptoasos h**o goao to usuallod

for lengths and tet* lod to daagorous inflation of crodit. At you

hare said , the buying of accoptsacos by f l o r a l Ej»inr« leaks # par*

ticularly from the larger city banks, I t but another font of a it*

co\»ti«g by coaworcial bunk*, and since the buying rate for accept*

anoes i t ttora»Hy lower than tho discount rate these jnircfcases of

acceptances aeed to bo bro-ugfct ?ery definitely into harmony with tho

general credit policy of ths federal Bossrrs Syste»,lf tht syste*

It to maintain. aoy effective relation to tht credit structure. K r«

from thorolbt of view of tho do’reloplBent of tho acceptfiiic® market

l t to if I believe thoro It everything to bo said for lotting accept**

snces otanfi. moro and more m tholr om merits,without a rtif ic ia l

support from tht Federal Keservo Bs«ks, and that this i t particular i f

necessary If tho Federal leeerre Banks, as i t seems to m they atttt

do, aro to ute thoir dealiagt la acceptances to giro thomtolvot moro

effective relation to tht orodlt situation, $& bo moro specific,

tb it will ttomiv I should say, that tho F®doml Boaenre Bfnk* will

have to recognise noro and moro that bankers acceptances , like short-

torn Government securities, isost yield a rato that will ho attrac*

tiro to tho market and should not ho bought, and cannot ho told,

at m a rtif ic ia lly low rato. It nut* alt# lnvolvs a wlllin®&ees

on tho part of tht Federal Seserve Banks to to ll beakers acosptancos

to tho ssarkot at well as to hoy tho*. Cfc«ted on lndspen&ent out*t

si do aarket for acceptances, i t toont to tat that tho m o r a l lUssrvs

Banks ought to ho able, through thoir porehaees sad salos to tho



i-3-

atrkot, to MtifeUsfe m offoctlvo rolation wit* tfco wmmy aarkot

that tmdor proton* conditiont II It d iffic u lt to iwwi througk tbo

discount rate,

▼try truljr yeort,

(Sijyned) S. P. Gilbert, j r.

S. P. OlUSSStt, Jr., tfedor Soorotary,

J. 1, Cato,c/o fodoral Botorvo Bank, 15 Saatao Stroot,How York, T\ T.



f9

f * THE UNDERSECRETARY OF THE TREASURYWASHINGTON # J

9 9 f April 27, 1923.

mRso m L . •

9

Dear I;ir. Comptrollers

# In accordance with our conversation I am send-1/ * * t

ing you herewith a copy of ray letter of this datef to

Acting Governor Platt of the Federal Reserve Board, with

reference to the liquidation of Government securities

# held by the Federal He serve BanKs, particularly as re-

0 lated to the capital and surplus of the banlss. I am also

# enclosing in this same connection a copy of a letter I

have sent Mr. Case as to the liquidation of Treasury

notes, together v/ith copies of the two enclosures which

ft

9 • *yconrpanied that letter# # $ #• •# _ Very truly yours,

• • •* . . *> * ->• •

# S. ?. GILES'S, Jr.,9 Under Secretary. •

• # * •Hon. D. H. Crissinger, ,Comptroller of t#e Currency# •V/asfr ington, o . C. •

. •4 enclosures. • .



msoBM, m cammamKL *prii «?, i 9 » .

ttoar Caee:

I m enclosing for yow information a copy of an interest-

ing letter which I have .Just received from tho Acting Governor of

(hi federal leserre Board showing tho holdings of various series of

treasury notes by tho several federal Boserve Banks, I am anclosing

oloo a tabulation of theso holdings by issues. I t would soon to me

under these conditions that I t should ho a relatively staple mat tor

for tho Fodoral Boserve Banks to dispose of a largo part of tholr

prosont hoXdings of treasury no too and to do this at a profit. X

have in mind that i t should ho particularly easy to soil in the

market tho Jone and September f 1934, and ths March, 19851 oorios of

notos, loafing ths othsr holdings to ho doalt with Xatsr as oppor

tunity offers, Tootorday*s statement of ths condition of tho

fodoral Boserve Banks as at tho eloso of business April 85, 1933,

Indloatos, it seems to iso, that tho program Which has boon followod

Is working even better than might have boon expected and i t Is \

roally encowaging to soo discounts and bill holdings going down \

at ths same time that holdings of Government securities aro bolng '

substantially reduced* If this proscoss can bo carriod a littlo

further tho fodoral Boserve Bank! will bo ablo to catch up on ths

market and actually got tho control tbit It was hoped to got through

Increases In the discount rate, I should think that the boot way

a \Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


to got ateod, oo you oncsoolM yootorday, would te to arrmgo throngfe

tilt Control Conmittoo on Opon Martet Oj*r*tiono to roplooo froaatury

notoa for fodor*l Iotorro loate which ooll tteni with M il* no# oorrlod

bjr otter M o ral Sooorvo loafes, tteo teoplag tte operation within tho

oyotoai and agocn$>11 thing * not gain through tte §alo of tte notoo to

tte «*rkot.

Tory truly youro,

(g ten ed ) S . P- « « ber1 • J r

9. P. fclOTff* Jr . t tfodor So«rotory.

J . H. Omo, Io%*§ e/o Todoral looorro Bonk, 15 Ikcua ®trootf Wow fork, 9. I*

8 onoloowoo.



COPT

1EEERAL mmwm bqabbWarfaington.

Office of Tice Governor April 2 ? , 19m.

Soar Mr* Gilbert:

A» requested in your letter of April 23rd 1 give yon below table showing by series end aaturity dates the holdings of ffeaanxy notes by Tbdeial reserve banks as of tho latest am liable date.

Bank

Boston

Bow Tork

Philadelphia

Cleveland

Bichoond

Atlanta

Sorloe MatarUy d »f Amount

A-1924 Jan. 16, 1934 $1,100,000B-1934 8*pt. U , 193* 1,002,000A-1925 Uaroh 16, 1928 920,600B-192& Dec. 16, 1936 1,008,100B-1926 S«pt. 16, 1936 900,000

B-1926 9q>t. 16, 1936 10,000,000

JU1924 Jurat 15, 1984 46,000B-1924 Sept. 15, 1984 166,500A-1925 March 15, 1986 8,775,200B-1925 Boo. 15, 1925 10,607,5000*1995 Jane 15, 1935 191,700A-1926 Ifcrch 15, 1996 *,525,000B-1%6 Sept. 15, 1996 68,400A-1927 Boa. 15, 1937 253,100

A-1924 Jfene 15, 1934 6,194,500B-1934 Sept. 15, 1934 2,337,000A-1925 Ifereh 15, 1925 300B~1925 Bee. 15, 1925 567,000C-1925 Jans 15, 1925 496,100A-1926 March 15, 1925 32,500B-1926 Sept* 15, 1995 1,776,800A-192? Boo. 15, 192? 29,500

B-1926 Sept. 15, 1921 100,000A-1937 Sec. 15, 1927 50,000

C-1925 Juno 15, 1925 215,000B-1926 Sept. 15, 1926 10,000A-1927 Bee. 15, 1927 58,300



Hon. 3. P. Gilbert -

-a -

Biok

Chicago

8t. Louie

Minneapolis

Kanea* City

Dallas

San franc ieeo

M m

B-1925C-1925A-19261-1927

A-1934B-1924*4985B-19250*1925A-1926B-1926A-1927

B-1934 A-1925 B-1925 A-1926 B-1926

A-1925 A-1926 B-1936 M 9 M B-1924 B-1926 C-1925 A-1927

B-1924

A-1904 B-1924 A-1935 A-1936 B-1936

fee. 15, 1926 Jam 15, 1925 ferch 15, 1926 Dsc. 15, 1927

Jans 15, Sept. 15 March 15 Etc. 15, Jam 15, March 15 Sept. 15 Dec. 15,

1924, 1934 , 19251925 1925

, 1926 , 1926 1927

Sept. 15, 1924 March 15, 1925 Dec. 15, 1925 March 15, 1926 Sept. 15, 1926

March 15 March 15 Sept. 15 Jan* 15, Sept. 15 Bra. 15, fos» 15, 1)90. 15,

1925 , 1926 , 19261924

, 19241925 1925 1927

Sept. 15, 1924

Jam 15, 1924 Sept. 15, 1924 March 15, 1925 March 15, 1926 Sept. 15, 1926

isssai$ 693,100

16,800 1,063,400

59.000

1,368,1001.154.0001.285.9001.246.900

850,6001.320.3001.555.900

274,300

10.000297.900

I,642,500238.900

1.069.300

II,307,300 1,723,500 2,412,200

7.0002.000

U , 909,1003.017.000

204,800

1.600.000

4.525.000 17,425,000

12,4001.850.0003.712.000

Tour* wry truly,

(3g&.) fcdoond Platt

Acting CloTOxmr.

Hon. S. P. Gilbert, J r . ,Under Secretary of the Treasury.



; ' ' 3 3 ' 3

April 3Tt 1983,

Boor Hr* PUtti

I m iivi& yewr Xottor of lapriX 341 1933 with fwrthor—. - ! n : r-__r|__ .. .i-i- J |.rfll|||r„. .. — .JSp. ww

rifirw # to lb* l»Xdln*ft of Qorornaont toooritiot ^ tho U t o i

looorto Stahl «aA mi oopurotoly acknowledging *ho roooipt of tho

dotoiXod infoxwttion dboet th* hoXdingt «f triM wy no tot* 9 m l

VpBo*rott Ikm hoon o*do la tlst pMt il* or eight montht In the

liquidation of Oorerateiit teaoritlet heid V tlio foderel B tf«re

Bflnlai h*t I tfctrald herdX? toy tint tlio liquidation hod reached it*

llB&t* XnoldeutaXX? I do mot <f«ite 000 tlio relation of the capital

ond m ueplvm of tlio rooorro bonkt to tl*ee tnveotttonto* It It tw*#,

of oowoo, that tho honk* now tnwro a ecafelned oepital odd m ptee

of about |3i?t000f000t hut of thli oowisnt $50,000,000 i t already

carried 00 invettwent in fete* prtnioot. Ao for tho taXenoe It

ooowo to m that It thouXd ho fctpt Xiquid, Xiho other federal

Beterve inveotment t , and that ito inrootatnt ooimot he eontiderid

eopftratoX? fro* tht general qpeetion of tho relation of fodorai

Xooorvo credit to tho aarfcett from thlo point of Hew thoro can

• certainly ho no doaht that tho ettahlithmont of tht federal leeerto

8yttea 2»t roXeaoed an cnonteae volute of fwadt to tho norhot and

that In no proper tense can it ho taid that tho capital tad tttrplnt

of tht fodorai 'Boeerve Bonks, ever and above thoir iwreotaent In

I

I ^. 3


Reproduced fromlhe Unclassified / Declassified Holdings of the National Archives

tamk prooUos, U *l%Mxmb t r m tho m rl* t t s l f n larooted in slow

OApilal Th* oornl&s »«••** Of tbs iy»to»f I t •••*• to ao.

Mist *o eottoidorod mi * wfcolo nod opoo mr%*% operations te w tf*

into Iwrm y «*** tin discount pollsy if tfeo Fodor*! *••« f» lonlco

art to wdntula oaocooofully anr gm m vl orodlt policy. la tin

sfcssooo of any laerooo# In tho diooovnt roto fortlwr liquidation

of«**n wrfcH puroliaooo offa*o tlia m%r opportunity of o*orolol2>c

control tbtm gb th* fodoral l*oorfo Banka and f*oa thla point of

?lo« particularly I thin* that fosrttot* aaloa feotli of Owomawot

ooouritloo and of Milo ia tba op** aarfeat ought to 3**0 tin most

oaraful conaidaration of tha M o ral Boaotro Board*

fory truly yoursf

(Simtrfj §. F. Gilbert,

8. P. ftisrat* #r.t f Undar iooretary*

Bon. t m m n putt,Acting ioiroxmor,Moral Boaanro BoarWfcahington, 9* C*

m 9 m

spa x wDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


THE UNDERSECRETARY OF THE!W ASHINGTON

April 37, 1923.

Dear Mr. Platt:

I have your letter of April 37, 1923,(and thank

you for tha information about the holdings of Treasury notes

by the Federal Reserve Banka.

Very truly yours,

JS. P. GILBERT, Jr. , Uhder Secretary.

Hon. Edmund Platt, Acting Governor, Federal Reserve Board, Washington, D. C,


W JF w -----------------------------------------------Reproducedfijj^l^fenclassified / Declassified Holdings of the National Archives

—-

April 37, 1923.

Dear Mr* Gilbert:

As requested in y our let tar o f Apr 11 33rd A give you below table •bowing by series »Qd maturity dates tbs holdings of Treasury notes by federal reserve banks as of the latest available data.

Bank: isjtitft Ma&acl&Ljk&t AmountBoston A-1934 June 15, 1934 $1,100,000

B-1934 Sept 15, 1934 1,003,000A-1935 March 15, 1935 930,600B-1936 Deo. 15, 1935 1,008,100B-1936 8ept 15, 1936 800,000

Sew York B-1936 Sept 15, 1936 10,000,000

Philadelphia A-1934 June 15, 1934 46,000B-1934 Sept 15, 1934 168,500A-19 35 March 15, 1935 6,775,300B-1936 Bid. 15, 1936 10,607,500C-}938 June 15, 1935 194,700A-19 28 March 15, 1936 3,535,000B-1936 Sept 15, 1936 68,400A-19 3? Dsc. 15, 1937 353,100

Cleveland A-1934 June 15, 1934 6,194,500B-1934 Sept.15,1934 3,337,000A-1938 Marob 15, 1935 3001-1936 Bee. 15, 1935 557,000G-1935 June 15, 1935 498,$00A-19 36 March 15, 1936 33,500B-1936 Sept 15, 1936 1,775,800A-1937 Deo. 15, 1937 39,500

Richmond B-1936 Sept 15, 1936 100,000A-1937 Bee. 15, 1937 50,000

Atlanta C-1935 June 15, 1935 315,000B-1936 Sept 15, 1936 10,000A-1937 Dec. 15, 1937 58,300

rxjuDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


Hen. 8. P. Qllbest - 3

Bank 2trJLai IfeftttltaJhta immkChicago 3-1935 Dec. 15, 1935 $ 693,100

0-1935 June 15, 1935 16,800A-1996 March 15, 1936 1,063,400JU1937 Dec. 15, 193? 59,000

St* Louis A-1934 June 15, 1934 1,368,100B-1934 Sept 15, 1934 1,154,000A-1935 March 15, 1935 1,385,900B-1935 Deo. 15, 1935 1,345,9000-1938 June 15, 1935 850,600A-1926 March 15, 1936 1,330,300B-1936 Sept 15, 1936 1,555,900A-1937 Deo. 15, 1937 374,300

Minneapolis B-1934 Sept.15, 1934 10,000A-1935 Maroh 15, 1935 337,900B-1936 Dec. 15, 1935 1,643,500A-1936 March 15, 1936 338,900B-1936 Sept 15, 1936 1,069,300

Xaneae City A-1935 March 15, 1935 11,307,300A-1936 March 15, 1936 1,733,500B-1936 Sept 15, 1936 3,413,300A-1934 June 15, 1934 7,000B-1934 SeptllS, 1934 3,000B-1985 Deo. 15, 1935 11,909,1000-1935 June 16, 1935 3,017,000A-193? Dec. 15, 1937 304,800

Dallas B-1934 Sept 15, 1934 1,600,000

San Tranciaco A-1934 June 15, 1934 4,535,000B-1934 Sept 15, 1934 17,435,000A-1935 M*rch 15, 1935 13,400A-1936 March 15, 1936 1,850,000B-1936 Sept 15, 1936 3,713,000

Youra very truly,

Acting Governor.

Hon. S. P. Gilbert, Jr.,Under Secretary of the Treasury.



THE UNDERSECRETARY OF THE TREASURYW ASHINGTON

April 27, 1933.

Dear Mr. PlattX received yore lett<mfApril 34,192 .th further

reference to the bolding* of Government securities by the Federal

Reserve Bank* and am separately acknowledging the receipt of the

detailed information about the holdings of Treaaury notes. Great

progress has been made in the past six or eight month* in the

liquidation of Government securities held by the Federal Reserve

Banks but I should hardly say that the liquidation had reached its

limit. Incidentally I do not quite see the relation of the capital

and surplus of the reserve banka to these investments. It is true,

of course, that the banka now have a combined capital and surplus

of about $327,000,000, but of this amount $50,000,000 is already

carried aa investment in bank premises. A* for the balance it

seems to me that it should be kept liquid, like other Federal

Reserve investments, and that its irxvestment cannot be considered

separately from the general question of the relation of Federal

Reserve credit to the market. From this point of view there can

certainly be no doubt that the establishment of the Federal Reserve

System has released an enormous volume of funds to the market and

that in no proper sense can it be said that the capital and surplus

of the Federal Reserve Banks, over and above their investment in


Reproduced from t ie Unclassified / Declassified Holdings of the National Archives

- 2 -

bank premises, is withdrawn from the market -unless invested in slow

capital assets. The earning assets of the System, it seems to me,

must he considered as a whole and open market operations brought

into harmony with the discount policy if the Federal Reserve Banks

are to maintain successfully any general credit policy. In the

absence of any increase in the discount rate further liquidation

of open market purchases offers the only opportunity of exercising

control through the Federal Reserve Banks and from this point of

view particularly I think that further sales both of Government

securities and of hills in the open market ought to have the most

careful consideration of the Federal Reserve Board*

Very truly yours

S. P. GILBERT, Jr., Uhder Secretary.

Bon. Edantod Platt, Acting Governor, Federal Reserve Board, Washington, D, C,



Dear &r. Case: ' <V*fce Comptroller of the Currency brought into the mating

of tho federal Reserve Board this morning a letter from Mr.Gilbert In which hs stated that In redeeming t&e Treasury certificates held by tha federal r**er«re banks maturing September 15th nett fee bad found that $1?,OOQ,OQQ of tfoeee certificates that 0a m from tha Federal Reserve Bank of Chicago «f« of tha series issued on Mardh 19 th last. Mr. Gilbert declared that he was tuaahle to see how this investment could have been made In view of the policy adopted of allotting all certificates to run off without reinvestment.

If this was a reinvestment It was made prior to the last meeting of the Governors conference and prior to the appointment of the jnew Open Market Investment Committee, but It ms nevertheless in opposition to the agrsament made last June by the old oommlttee on Government securities.

Ity recollection is that Governor McDougal told me at the meeting In %lladelphla on April 13th that his bank had purchased no securities outside of the System since the first of January and I think he stated that the increase of the securities held by the federal Reserve Bank of Chicago teas due entirely to allotments or assignments within the System. I should be Interested, therefore, in knowing Just how the Chicago bank came In possession of the certificates Issued last March. I stated to the Board that this might have been done as a matter of adjustment by exchanging eome other maturities or by sale to the market of some other maturities and taking these instead. Is this the correct e*plagnation or whs there a direct reinvestment made In that case?

Tours very truly,iI

Acting Governor.

Mr. J. H. Case, Acting Governor, federal Reserve Bank,

lew Tork, N* T,Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

szAOUBiit iMUNisa Boones or w&asmbx * * * » . st amiss, im iBVKatmai aqcqumi® i» mwsn m * m m jjabiu, as m aisb. ns>,

1 9 2 3 .

fe d e ra l Baaa rra

Banks

i i i : i » « t3*rl»# 4*1924 &•*!•* B-1924 &«riaa 4*19 25 Series B~19£6 Seriaft C*192 5 Sariaa 4*1926 Bar&aa B-1926 Berlaa 4*1987

; maturing : maturing * a& taring : ©staring : nataring : maturing ; aa taring i aa taringJtina 16 , £>ept, 1 6 , Maroh 15, Jfee* 1 5 , Juna 15, Ma rah 15 , Sapfc* 151 Deo. 15 ,

i 19E4 : 1924 i 19E6, s 1926^ : 1928 ; 1986 : 1986 i lW f6 - 8 / 4 5 1 8 - l / E j t 4 - 3 / 4 * 4 - 8 / 8 * 4 - l / B j t 4 - 8 / 4 * 4 - 1 / 4 * 4 - 1 / * * °»

1CD* .. U%

Boston 1,100,000 1,002,000 900,600 1 , 008,100 m *► 800,000 » 4 ,830,700

Sew T<r * m ** <* •» * 10,000 ,000 «k 10,000,000

Philadelphia. 46,000 168,600 8 ,776,800 10,607,600 194,700 fc,6S6,OO0 68,400 £63,100 ££ ,638,400

ClaTalaxid 6,194,600 £,33 7,000 800 687,000 498,100 3E, 500 1,776,800 £9,600 *&,484,700

Biahmond » ♦ 4» «a 4» m 100,000 60,000 150,000

4 tla n ta m * #» a* E l i ,000 - 10,000 58,300 £83,300

Qhioago m •» Ml 693,100 16,800 1,063,400 m 69,000 1 ,832 ,300

3 t* i*ouia 1 ,368 ,100 1,154,000 1,885*900 1,£45,900 850*600 1,320,300 1,555,900 274,300 9 ,055 ,000

Minneapolis «» 10 ,000 £3?#9o& 1,648,600 m £38,909 1,069 ,300 •» 3 ,198 ,600

Kansas Olty 7 , 0 0 0 & ,UO0 11,307,300 31,909,1(30 3 , 017,000 1 , 783 ,bQO 8,418,£00 £ 0 4 , 3 0 6 30,588 ,900

imaiaa * 1,600,000 «• «*> * m **► 1* 1 ,600 ,000

San Pranoiaoo 4 ,6 2 6 ,0 0 0 17,426,000 12 ,400 •» - * 1 ,850 ,000 3 ,71 8 ,0 0 0 4ft £7,624,400

fo ta la i $13 ,240 ,600 25,698,500 ££,639,600 87,663,200 4 ,792 ,200 8 ,7 6 3 ,6 0 0 21,603,600 989,000 183,*80,300



T ELEG RA M

FED ERA L R E SE R V E SYSTEM(L E A S E D W IR E S E R V IC E ) ^

RECEIVED AT WASHINGTON, D. C4,'

119fot

Minneapolis 1137a A p ril 26

Edmund P la t t t Vice Governor PR gr, 1923A k «w.» 4,.-, < *

Washington.

Your .wire A p ril twenty fourth .) Me hold treasury notes for our own investment as fo llow s;

B-1924 Sefcjb 10,000

A-1925 March 227,900

B-1925 December 1,642,500 A-1926 March 238,900 B-1926 Sept 1,069,300 V Total #3,198,600Other Treasury notes are held- on repurchase agreements fo r temporary accommodation o f others

Rich 1247p\



T ELEG RAM

FED ERA L R E SE R V E SYSTEM(L E A S E D W IR E S E R V IC E ) 3 3 -

RECEIVED AT WASHINGTON, D. C.,

53nr rrrfc

B o s t o n 1 2 4 5 p a p l 25f5’

B e a r d

Washn

Answering -vcur wire apl 24/holdings of treasury notes our investment account as

fell OVS • /' / ■Series A 1924 $1,100,000‘'"series B 19£4 $l,002,00(Sf//£. 1925 $920,600

B 1925 ^OOS.lOl/^B 1926 $^00,000 total #4,830,700

Getteray



(L E A S E D W IR E S E R V IC E )

RECEIVED AT WASHINGTON C.,

38nrs

Platt

3 s

W a s h in g to n

Replying to ycur telegram dated Aoril-M.jwe are holding ®ur investment account

close of business April 24, the following securities. US 4 1-4$ Treasury notes (series B-1926) dated 8-1-22 due 9-15-26 $10,000,000

Jay

12E

ooTBtnoDff nujmno amcm 2—11901Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


T E LEG RAM eVa* &I j j N . ^

6rbhf FED ERA L r e s e r v e s y s t e m(L E A S E D W IR E S E R V IC E )

0 Ak[ M L nc.oc.r\vC. o i a i t m(L E A S E D W IR E S E R V IC E )

P hi l a A p r i l 25 , 1030a ^ f— " 11 RECEIVED AT WASHINGTON, D. C.t

Board,

P l a t t , Washington.

Tr®asuiy note h o iu iz^ s alos® of b u s in ess % r i l 24 ar©$ S e r ie s Jk 1924 -4 6 ,0 0 0 $

B 1924 v 1 6 8 ,5 0 0 ; A 1 9 2 5 - 8 ,7 7 5 ,2 0 0 ; B 1 9 2 5 -1 0 ,6 0 7 ,5 0 0 j/ c 1 9 2 5 -1 9 4 ,7 0 0 ;

A 1 9 2 6 - 2 ,5 2 5 ,0 0 0 ; B 1 9 2 6 -6 8 ,4 0 Q i y d ' l S Z f ^ 2 5 3 ,1 0 0 .^ T c ta l 2 2 ,6 3 8 ,4 0 0 .

Post

1054am

2—11001*/**/>*



F e d e r a l R e s e r v e B a n k 3 o r R i c h m o n d

CALDWELL HARDY,CHAIRMAN o r THE BOARD

AMOreom AL MM NVK AOENT

J.0 .F H Y ,ASST. rCOCRAt IWSERVE AOIHT

* R H. LEE,ASST. FEDERAL RESERVE AGENT

April 25, 1923*

SUBJECT: Holdings of Treasury Notes


Attention: Mr. PlattDear Sirs:

Acknowledging your wire,.of late ...yesterday beg to advise that at the close of business April 24th, we hold the following Treasury Notes:

Series B-1926 due Sept.15,1926 ........... $100,000.

Series A-1927 " Dec. 15,1927

Total . .

50.000.

|150,000.

CH:F R R E I V E D



OTFICJE OEf lTrA TintrA iT o f t t t f . B q a h D .

F e d e r a l R e s e e c v e A s h j i .

F e d e r a l R e s e r v e f tv N KO F A T L A N T A

A p r i l 2 5 , 1 9 2 3 .

FEDEE1L K3SERVE BOAKD, W a s h i n g t o n , D. C .

G e n t l era 0n: i - t t a n t i o n -A c t i n g - G o v e m o r P l a t t .

A n s w e r i n g v o u r t e l e r r a r n ^ r e c e i v e j L y e s t e r d a y / a f t e r n o o n , we w i r e d y o u t o d i y c l W n g t h e d e s i r e a i n f o r m a t i o n , a s p e r t h e e n c l o s e d c o n f i r m a t i o n , sh o w in g t o t a l amount o f o u r h o l d i n g s o f T r e a s u r y n o t e s i n i n v e s t m e n t a c c o u n t , t o "bs § 2 8 3 , 3 0 0 , a s o f A p r i l 2 4 , 1 9 2 3 .

Y o u r s v e i y t r u l y ,

2 n d .

\/ 2C

\



T ELEG RA M

FED ERA L R E SE R V E SYSTEM(L E A S E D W IR E S E R V IC E ) p\v.

RECEIVED AT WASHINGTON, D.ODC<

128anr 9sAtlanta 116p Apl 25 1923

Beard

Answering H a tt *s wire 24 th )at close business April 24,1923 we held for permanent

investment following treasury notes.SERIES 0-1925 3-1926 A-1927 ✓ Total amount

RATE 4 1-2 4 1-L 4 1-2

AMOUNT / 215,00© 10 ,ooo ✓O* ■58,300283,300

MATURITY 6-15-25 9-15-26!^ 12-15-27 v-

MaGJerd



F e d e r a l R e s e r v e B a n kO F

S t- L o u i s

April 25, 192S.

Federal Reserve Board, Washington.

Gentlemen:- Attention Hon. Edmund Platt.

Complying with your telegram of^tfte 24th inst.j I am.......- -- ----- -

pleased to advise that at the close of business last night this

bank held in its investment account, United States Treasury

Notes as follows:

11,368,100 1,154,000X .1.285.9001.245.900 V<

850,600X1,320,3001,555,900vA

274,300

Series A, 1924 ^" B, 1924^

A, 1 9 2 5 ^ 0B, 1925 C, 1925 \KA, 1926 y^CB, 1 9 26> - A, 1 9 2 7 ^

Due June 15, 1924 /*■" Sept. 15, 1 9 2 4 ^ ,11 Mar. 15, 1925" Dec. 15, 1925" June 15, 1925" Mar. 15, 1926" Sept. 15, 1926 M Dec. 15, 1927



TELEG R A M

FED ERA L R E SE R V E SYSTEM(L E A S E D W IR E S E R V IC E )

% u

RECEIVED AT WASHINGTON, D. C.

170fbKansas C ity A pril 25 1055am

P la tt

Washington.

investment account; as a i c Issue A-192 A-192 B-192 A -1 9 2 4 w

A-1925<V A-1926'/)/' E-1S26 'Qr

B-1924/ y

C-1925B-1925* *

A-1927 vATotal

A )

Maturi ty . 3-15-25 3-15-26 *>> 9-15-26 6-15-24 v \ 9-15-24 12-15-25** 6-15-25 vV" 12-15-27

cse of business A p r il 24 a^ Amount. $11,307,300 1,723,500 2,412,^00

Earnsar.146p

7.0002.000 v - X11,909,100 .. 3,017,000Vc>> 204,800 wVj #30,582,900j.

sp G * S.



~*~ELEG RAM


RECEIVED AT WASHINGTON,

o*

"**ma 3

led aCleveland Ipl 608pm 25

PlattWDC

gire 24th,|re own #11,424,700 TTeastiry notes ss follows*Series A-1924 dtae 6-15-24 amount i6,l94,500'^V

v300 YSeries 3-1924

1-1925 B-1925

9-15-243-15-25 12-15-25 /y

2*337^000

0-1925 < 6-15-25 S/ A-192&S 3-15-26 / B-1926v^y 9-15-26 v'V A-19 27 13-15-27

557,000 xX 498,100' , 32,500 ^ 1,775,800 r > 29 , 500

2xrlin<3en1003am



239f i:aS&ic

-• la it• ^ashn

Cur holdings follows:

E 1925 V'''C Vrc.x"/' .A 1926 i/V A 1927 \/

T ELEG RA M


Q.

RECEIVED AT WASHINGTON, D. C.,

3 2 J.:

igo 412p April 24 I >AFR 34 1923RECEIVED

of Treasurv ftotee at close of business to-day are as

bei io s ,, Maturity.December 15 1925 §693,100.June 15, 1925 ^ 16,800.March IE, 1926 ^ 1,063,400 I/ecemtex IE, 19271^ ' 59,000.

1,832,300Heath

52^’Crr:

2—1190 /xjui % %Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


T ELEG RA M


RECEIVED AT WASHINGTON, D. C..

o r r - pO t- _L j. ci.

Delias April 21 138c

In ve&t'ront cccou-.-t are'-Jl, 600,000 Series E 4 1-4 ;v r-

1 • rhcbr ar e held under rer;nrcl:ase asxeemec te pt er

Talle.v6 0 1 p

/ '

a—ii«»Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


T ELEG RA M

FED ERA L R E SE R V E SYSTEM(L E A S E D W IR E S E R V IC E ) E

20fhf• i\ik 3 5 jLM'RECEIVED AT WASHINGTON, D. C., ^

^anfran *pr il 24, 5pm £5th $$Board,

.VashnTreasury note holdings of this bank April 23 1923 as follows:Series A 14^4 maturing June 15,1924 $4,525,000 & 1925 March 15,1925 ^12,^00 A 1926 March 1^^1926 $1,850^/000 B t.e.-nher

15, 192V*17,425,«6c E 1926V*ep tender 15, 19fe^|3,712,0CC

tota l f27,524, 400.

Pe r r i n935 am



4 P

FOR ANSWERS SEE:

1.

2.

5.

4. * / / > 3

5.

6. V / v s / v *

7.

8. H 3

9. * / / v £ ^ y 3

10. /'>'* f > y

11. *-/ j T'£//7'^

12, if / v z / v ^

Date



THE UNDERSECRETARY OF THE TREASURYW A SJdlN G TQ N '^"'VASHINGTO

.O & Z ZApril 24, 1923.

Dear Mr, Comptroller:

In view of our talks about the investments of the

Federal Reserve Banks in Government securities I think it will

interest you to know that out of the $36,000,000, or thereabouts,

of September 15th certificates redeemed to-day by the treasury

for Federal Reserve Banks, $17,749,000 represent certificates

°f Ser*es TS2-1923 held by the Federal Reserve Bank of Chicago.

“f M _ These certificates were issued under date of March 15, 1923, and

’a/-' s

* >

I have son® difficulty in understanding how the Federal Reserve

Bank of Chicago ever came to invest in them at all, in view of the understanding between the Federal Reserve Banks, the Federal

Reserve Board, and the Treasury that Federal Reserve Banks* hold

ings of Treasury certificates maturing March 15th would be allowed

to run off without reinvestment and the subsequent understanding

that the June 15th certificates redeemed by the Treasury at the

time of the Governors* Conference would likewise be allowed to

run off without reinvestment.

Very truly yours,

Hon. D. R. Crissinger, Comptroller of the Currency, Washington, D. C.

,1S. P. GILBERT, Jr., Under Secretary.



i

POIM 148* TELEGRAM

FEDERAL RESERVE BOARD| LEASED W IR E SERVICE ^ w ^ *

, - W A S H I N G T O N

April 94, *•$»,

e&rllt* - Bo*to a Jay - V*» T®rk Austin • tills *

Haatt* * Oblonf* Curtin * 81. lenl*

K io to - M in n f t i ig w iia HttiMiRy • Kmum 01 ty T*ai«y * BaIIa*Perrin * Sun franaitae

hr i&fiHMtfftxi of Tr**in*ry Mn-Jly ndr&«« le»r* fceidin** of Treamsfy &**«» ia yotr Savesfeiaitt *000 unt >y no* m ltirlljr *«*#• *§ of tlm* m i U M ® « * % « »

n i f f

I P



TREA SU RY DEPARTM

WASHINGTON

April 23, 19Mjy dear Mr* Plat t : '

I should appreciate it if you nould furnish me with a statement showing* by serles and laatu'ity dates# the holdii^s of Treasury notes by eaoh Federal Reserve Bflwir in |.ts investment acoount, as of tjhe latest availabledate*

Very truly yoursf

S* P. GILBEKT. Jr., Ufcder Secretary©

Honorable Edmund Platt,Acting Governor,Federal Heserre Board*



\

OJLO-

■

f o b /. , I l

April a*v ita3.

Daar lir. a t l b a r t :

I find tfcat our raoorda o f tha holdings o f fraasory fJoln# hald by Fsdaral roaarva banks do not sho# tha holdings by sa rta a and t t io r l t j r datas* Tfcsra wsra on April 4 th In tha *feola Systaa $ 1 17 ,600 ,500 of Treasury notes a n !, ap art fro® tha Sap isobar 15th s& tQ ritlas o f c a r t f f ic a ta s to bo radaaaad aa of today, and tha Bacaaihar 15th mfcnrifct#* of Treasury c e r t t f io a to s , amounting to $ 3 4 ,0 0 0 ,0 0 0 , and $ 3 ,0 0 0 ,ODD of e a rttfic& ta a m tn rlo g Marsh 15th oaxt, th ia oosspriset p r a c tic a lly a l l of the h o lU ag s of the tfadar*! mmrm backs in Go*«r**£gar»t *oaur5 t i e s , not sonntlnsr $ 3 9 ,0 0 0 ,0*)0 a* ônâ boxifht ao atlv hafora tha » r , Thasia ôn!« In my opinion should not va « o li w*3ar any nir extras t&ncas* an*i T ars sorry that in t^ e ir a ffo r ta to rad^ca Qoaemnant a a o e rltia s ilia banks h?nra actu ally 4i*po**d of $14,600,000 of tha» since May 17, 19T?. 'fhere *are in addition on April 4th 110,471,000 of c#rtific»tas hali on aulas contracts this ita* will *ary from tan coil lion to thirty million dollars. It stood at 137,331,000 on October 31, ItBl. y ,

I '*rota rathar fully on thia m b ,1*41 to tha $aar£ttary of tha -&M- *■ „ Treasury a.ftar ay retorn from tha seating of tha 0r*m Varât Investment 'Comîttae in Philadelphia an* stressed tha otkiloa that tha deflation of th# hoHiners of Oovernepent ssourf ties In the Jtaderal rsserv* banks has go as almost to tha liisit. It npist ha rsi»a»b«red,I think, tbnt tha banka ha*® a capital and surplus of $317,300,000 and that thia la * fend which stands apart fro® thoir raaarira deposits and M y |Rpop#»iia'J!*%ap kept fttlly invested in CSoaartarcant aeotiritiaa from a striat Bmmrvm hank standpoint. Tha inTeataenta of tha ^federal reserve basks in Treasury iso tea and oertifi cates A»a now do«n to $153,000,000, certainly a low figure.

I sanding out wlt m to tha federal reserve ba-nfea asking them for tha information re-^t*astM.

Totira vary truly.

Acting 0oT*arnor

Bon. S. F. Gilbart, Jr.,tfofler Secretary of tha Treasury.

^>3 a j * X eJT Z ,- 3



FE D E R A L R E S E R V E BANK O F C H IC A-feiiii ..-dda . .VS,.,

230 SOUTH LA SA LLE STREET

A p r i l 2 3 , 1 9 2 5 .

M r. Edmund P l a t t , A c t i n g G o v e r n o r , . tF e d e r a l E e s e r v e B o a r d , j f r

W a s h i n g t o n , D . C . '

13y d e a r M r . P l a t t :

I am i n r e c e i p t o f y o u r l e t t e r o f t h e £ 0 t h j l n s t a n t ,

e n c l o s i n g o o p y o f t h e r e p o r t a n d re c o m m e n d a t io n s of t h e C o m m itte e

on u n em p lo ym ent an d b u s i n e s s c y c l e s .

!Ehe p e r s o n n e l o f t h e c o m m i t t e e a p p o i n t e d b y t h e

P r e s i d e n t i s s u c h a s to command h i g h e s t r e s p e c t , a n d I f e e l t h a t

t h e r e p o r t e n s u i n g i s one r n i c h s h o u l d b e w i d e l y d i s t r i o u t e d an d

r e a d b y b a n k e r s an d b u s i n e s s men g e n e r a l l y *

I a p p r e c i a t e v e r y much y o u r p rom pt r e s p o n s e t o my.

r e q u e s t f o r a c o p y o f t h e r e p o r t .

V e ry t r u l y y o u r s ,


f e d e r a l r e s e r v e b a n k o f n e w y o r — Honorable Edmum la. — 4:/2l/25.Washington, D. 0.

#

this is an immediate easing of the money market, which lasts until tax

checks are cleared and the receipts and disbursements again come into

balance. On March 15 exactly the reverse situation developed; tax

receipts were in excess of the redemptions and interest payments and

piled up a comfortable balance in the Federal Reserve Banks. This

balance was not available to the money market save through the usual

process of borrowing from the Federal Reserve Bank. If such borrow

ing occurred it carried a rate of interest, and if it did not occur

funds to the extent that Government receipts exceeded Government dis

bursements were not available to the market. The redemption of

certificates out of these unexpectedly large tax receipts, to which

you refer, occurred entirely within the Federal Reserve Banks; that

is the Treasury bought certificates previously owned by the Federal

Reserve Banks. This transaction had no effect whatever on the money

market, serving simply to reduce the Treasury’s balance at the Reserve

Banks and to reduce also the Reserve B^&ks’ holdings of Government

obligations. No new money reached the market through the transaction.

Purchases of bonds for the account of the sinking fund may or may not

affect the money market, depending upon whether (first) the purchases

are made from the Federal Reserve Baijks or in the open market, or

whether (second) such purchases along with other Government disburse

ments tend to offset withdrawals from banks.

A reduction in the gross amount of Government debt is un

doubtedly, as you say, a deflationary step, looked at in the gross.

But it is entirely conceivable that payment of debt by the Government j if such debt for example were held outright by individual investors,




Dear Mr. Platt:

I have your letter of April 20 (in which you raise some in-— ---------- - ' ^

teresting questions about the effeet upon the money market of various

Government transactions, such as purchases for the sinking fund, the

redemption of certificates, etc.

The general principle is that there is no effect upon the

money market whatsoever if disbursements by the Government for any

purpose coincide fairly closely in time and amount with withdrawals

from the banks, either by way of tax receipts or the withdrawal of

Government deposits. This principle does not take into account such

incidental transactions between banks and their customers as loans

for the purpose of providing funds with which to pay taxes, or the

cancellation of debt owing by a. customer to its bank effected with

the proceeds of a redemption. Such operations are really extraneous

to the main principle.

The effects on the money market which we notice from time

to time arise principally from the failure of Government withdrawals

and Government receipts to coincide in time and amount. For example,

after the March 15 quarterly tax day the tax receipts were larger than

the Treasury anticipated, and for fully a month the Treasury had funds

in the Federal Reserve Banks with which to meet its current requirements.

Usually the Government disbursements on a quarterly tax day have been

larger and more prompt than the receipts from taxes. Th© result of



fe d e r / - r e s e r v e b a n k o f n e w Y o K i - Honorable Edmun^ .'la , - 4 / 2 1 / 2 3 .

Washington, D. C.

would not affect the money market adversely in the long run but would tend

to stimulate it. The immediate effects of such operations,however, depend

upon tlie conditions which I have outlined above.

At the close of your letter you ask whether I understand that the

payment of the 5 per cent. Farm Loan bonds takes bonds out of the Treasury

which are now held there. I do not understand that to be the caBe, but%

that this is rather in the nature of a refunding operation. Some 55 millions

of 5 per cent. Farm Loan bonds are called for redemption on May 1. The

new issue, which amounted to about 75 millions, I understand to have pro

vided the means whereby this redemption takes place and at the same time

supplies additional funds for the further us.es of the Farm Loan Board.

If I do not seem to have made a case in the foregoing please letme know.

Very truly yours,

J. H. G&se Deputy Governor

Honorable Edmund Platt.• * * Vice Governor, Federal Reserve Board,

Washington, D. C.


0 0 ? X

374-V* April SI, 1928.

so omasoRS wmmtx mmsm b u ss .Boston (Mongo

3 t» tm i*Ml vyyflfipril i f

Gait Warn YtwitPhiladelphiaCl«T»XaudBi&hmoiidAtlanta

gfrayf-f O i ^aaia*3aa Fnmolsoo*

la fur«ho*aao* of tl» pollc* <* liialdatloa Igr l*dam l Baoorr*

Banls of Itetv teddfe* of >iwn— > ••earIt 1m, tho Sroooary

wold 1U» to n t t r * tb* oartlfteat** of lad*kteta*oo mturing

SoplMfcor M» 1*28, hold la tho Im otaont a oooonto of tho

Foderal Hoo«m Same*. Oto T*oeoiry u aooordlngljr off» rli«

to a ll J*d*ral ltooorro Bade* to *odoe« a t ja r eat aoora*d

lutoreot to data of rodaqptlo* a ll Soptoafcor 15 oorti float** oo

bold, tit* rodoiqitlaaa to to nado on Snood*?, April 24th.

TO* aortlfloatas oo nteenod ahoald be otergod in srotttv****

aocount ao Is ordinary oaoo* of rodttpttaa, first

oortifioatoa n t fon*rdfe« tlm to Snamrwr oMioitilod mdor

date of obaiBo la too oaoal aoaaor, 9to Jtv*oawjr hop** tM

a ll Jfcdoni Bo***wo Satie* will ao«*pt thl* ofTor, and, ianrlag

la alad tti* gmmCk poliogr of affootlng gradual llquldatloa of

kp m iona Rooorro In k holdias* of Oaranoiaat ooaarltina tl» t

th»*o aorti floateo will bo ndoaaod without ro1 moo f i l l of tho

prooMd* la othMP M w n t ooovttloo. Pi**** «lrl*« a* ty

t*l*g n a of ymr daolalaa.

OXUKia* (Initialed s . ? . s . )a n d o b 3*p. of loan* a d * .



copyApril 20

Dear Mr, Cases

This will acknowledge receipt of you&S.ing copy of the minutes of the first meeting of the Open Market Investment Committee for which I wish to thank you. I have made an informal report of the meeting of the Committee to the Board and think I shall write out and put on the minutes a more formal one.

I notice from your daily reports that bill rates have gone up at least an eighth although the general tone of the money market seems easier.

By the way, there is one Treasury force the effect of which I am not quite clear about. In the first place, the sinking fund takes a good many Government securities out of the market and puts money in. In the secbnd place, the Treasury I think is undoubtedly using the surplus revenue due to the unexpectedly large customs receipts and income tax payments in redeeming certificates. It seems to me that this puts money into the market, although from another point of view it may be called "deflation", and is in fact one of the items of deflation mentioned by the Right Honorable Reginald McKenna in his speech of some months ago to his stockholders in London.

Do you understand that the payment of the 5 per cent Farm Loan bonds takes bonds out of the Treasury which are now held there? If so, that offsets to some extent the items of redemption from surplus revenue.

Yours very truly,

Acting Governor.

Mr, J. H. Case, Deputy Governor, Federal Reserve Bank,New York, N. Y.


n'dafSffied I D^cTassified Holdings of the National Archives/

April 30, 1933

i i

D«ar Hr. SeorataryOn Friday of la»t week I attended a meeting of tho new Open Market

Investment Committee of tba Federal Beserve Isaaks held at Philadelphia.The coonittee is i»ade up of the Federal fie serve Banks of Boston, Hew York, Philadelphia, Cleveland and Chicago, a»d there were present Governor Harding, Acting Governor Qase, Oovernor Norris, Governor Fancher and Governor McBougal,

After preliminary discussion the oomaittee organised by electing Mr.Case as Chairoaan and then ensued a full discussion of the whole open market policy of the Federal Bsaerve Systes. I will state briefly the results of the Meeting and then take up some of the facts brought out by > \ the Governors present and soiae mat ter a of the discussion. The Governors tfi| L voted to recotaaend to their own beards and to the other Federal Beeerve ^ \ f \ banks that the Treasury certificates maturing on September 15th, amount in to $35,953,500, be tendered to the Treasury at par and interest If and " when the Treasury is willing to take then. The ooomittee also voted to raise the open market purchasing rate on acceptances 1/9 which will make the rate at Hew York for purchasing short bills 4 per oent, for sixty-day bills 4-1/8, ninety-day bills 4-1/4 and longer bill9 4-3/8. This action has already had its effect upon the brokers offerings in New York City.Further mors it was understood tiiat the banka buying bills would buy each day a little less in value than the amounts maturing.

Mr. Case presented a schedule of the holdings of all Federal Ho serve banks in Halted States securities and other earning assets*^rtte-)*ls t X ,1932, to April 4, 1933, inclusive. The holdings of Government securities were at their peak as you know in May 1933, being at $594,975,000 on May 17th, and $603,419,000 on May 31st. Frets that time they began rapidly to decline end on April 4th had been reduced to $339,149,000 while other earning assets had Increased to $996,109,000. Government securities therefore have been reduced no less than $355,896,000.

When yon consider that of the 1339,149,000 held on April 4th last $10,471,000 were held on reptr chase agreement there remain only $328,678,000 of investment securities in the Federal Beeerve System, and of these $39,083,000 are Government bonds, nearly all of then bonis bought before the war in conform! ty with Ssctlon 18 of the Fsderal Beserve Act. Sorae of them are bonds still bearing the circulation privilege and others are conversions of such bonds into 3 per cents. When these are subtracted it will be fotmd that *there remain in the Federal Beeerve System only $189,095,000 of bonds and notes and certificates of which $34,011,000 are fleesaber 1923 maturities, $2,062,500 March 15, 1924 maturities and the balanoe $117,550,000 are Treasury ' notes.


Hon. A. W. Halloa 2.

Thi» r«pra*ant» a grotty dr»«tlo inflation af 3»onrltla« and vit seeaed to t bo oosnittee that the ank* have goo# About as far in this oat tor at they should be expected to go. X oufht to say that tho $10,471,000 of Treasna'y certificate* told April 4th on sales contracts represent a low •tag* of that its®. On October 86, 1933 tho amount hold was $37,331,000 and on January 31, 1933, $35,301,000. Mr. Oasa told mo that this item would fluetBat« from ahout $10,000,000 to $30,000,000. It May bo considered practically negligible but an Inofoaoo or decrease of ft to or ton million* In any weekly atateoent might bo thovm without any aotual lnoroa.se in the investsent account* of the hank*.I »lght add that in their effort* to reduce their holdings of Government securities Federal Boserve banka since S&y 17, 1933 ha to actually sold nearly $14,000,000 of bonds bearing the oiroulatlon privilege which I believe was a very bad policy •Id it simply puts that amount of national bank notes back Into circulation. T / have protested vigorously against tills and hope I have succeeded in producing y f some lopression.

When you consider that the Federal Beserve 'banks have a capital and surplus of $387,000,000 which was -really taken out of ths working fun's* of the banks which Joined the System and represents that much deflation uni ana it Is invested I thick yon must admit that the holdings of Government S3cmrities at the present tiaae are very low. Counting out the bonds which represent subtraction from the national bank circulation and counting out the $10, 000,000 held on salos contracts the Beserve banka have $137,400,000 less invested in Government securities than their capital and surplus. Every time a new bank Joins the )System and every time the capital and surplus of any present member batik are V increased something is added to the capital of the federal Reserve banks which is taken out of the storking funis of tie country and locked up unless reinvested. Daring the past year, that is between April 5, 1933 and April 4, 1933, the capital of the Federal Baservo banks Increased $4,064,000 while the surplus increased $3 ,000,000. The capital increases a few thousand dollars almost every week.

It would see* to &e, tharefora, that the oapital and surplus of the Federal Be serve banks should be continuously invested regardless of the demand for discounts, not only as one of the chief moans of supporting the Federal Reserve banks but as invest«*mts which can not possibly effect the too nay market in the sense of adding new funds to the market because such investments sirsply return to the aaarkot what have previously been subtracted from it and leave the conditions as before. This was substantially tho view of the committee and is also the opinion of Mr. SEarburg with whom we talked over the open market invest inert policy of the Itederal Reserve banks when he was last here something no re thwsn a week ago. My own feeling has always been that a considerably larger proportion of this fimd might be invested in long time bonds.

Since the federal Be serve hanks now have $137,400,000 less them their oapital and surplus invested in Treasury certificates and notes it seems to as that we oay fairly be said to have deflated to that extent. I believe that when the Investment* of tho Reserve banks in Treasury certificates and notes or In bonds other than bonds bearing the circulation privilege reach $250,000,000 they may be said to be excessive and to be Influencing the narket In the direction of easy money, but When they fall below $300,000,000 it seems to m» the influence is distinctly In the direction of deflation. X understand from Mr. Case that arrangements are to be and* to take up the September 15th maturities *toidh will


Bo«. A. W. M»llon 3.

aotTjally I n n tb. Jfcdantl B a w r w bask. only a Xlttla more than $163,000,000 of Treasury certificates and note*.fhy Should not the freasnry consider that about the alniaon with 1 3 5 0 ,000 ,000 as a aa*ima».

Perhaps it aay ba said that tha holding* o f aooeptancas or "bill* bought in tha open market* oujght to be considered In the *ane category ifith Treasury , certificate* and notes, bat thara 1* thl* dlffareno* * tha acceptances repra- •ant actual bn*ineas transaction* and are self-liquidating. *orth*ra»re mlaaa tha Federal B eserre baaie* oaka *o«* in*e»t«*nt* in acceptance* tha acceptance business will ba entirely destroyed or driven to London as it w ill be Ju st as aheap to s e ll open market one nanei paper a* to arrange fo r the accepting of drafts In 'banks or acceptance houses pa^in*? tha 1/4 of 1 per cant commission.Mr. Case eeaaad to think it doubtful -Aether the market could stand a further false of 1/8 unless the rediscount rata *as raised.

Youra vary truly,

Acting Governor.

Son# A, V, Mellon,8eor9tary of the Treasury.



jfc r ii so, a a n .

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1 imm $m% imm Or* Om* » a jjr «#th* mdmfcm ef f i m t asking «f Wit* o$«* liirisaii 2m r n & m m & O^ r Sit^ M l tw*» not jr®t m a. dtana*fc# m l thm*

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€b£ti*$Bt III*



FE D E R A L R E S E R V E BANK O F C H IC A G O230 SOUTH L AS ALLE STREET

A p r i l 18, 192 3 .X . ' /

Mr. Edmund. P l a t t , A ctii ig Governor,Fe d e ra l R eserve Board,

W ashington, D. 0 .

My dear Mr. P l a t t :

As you probably w i l l remember, a t the P h ilad e lp h ia m eeting I read some e x c e rp ts from the re p o r t o f a_oammittee gj)p o in ted by the P re s id e n t to in v e s t ig a te th e cause.5—o f b u s in ess d e p re s s io n s .

The a r t i c l e which I presented and which was taken from the A p ril 9 th iss'ue o f the American Banker was not a comp le t e rep ort o f the committee r e f e r r e d t o , "but I understood you to say th at the r e p o r t had been pu blished in p r in te d iorm# While I b e l i e v e you in d ic a te d the source th rou g i which we may r e c e iv e the same, I f a i l e d to mate the n e c e s sa ry memorandum. I f you have an e x tra copy of the re p o r t r e f e r r e d to or can o b ta in a copy of the same in my b e h a l f , I s h a l l g r e a t ly a p p r e c ia te the a t t e n t io n .

Very t r u ly y o u rs ,



# / j CP.T ~ V *

April 18, 1923

"Mr, Miller distributed to the members of the Board copies of the first draft of the forthcoming Review of the Month. Thereupon there ensued a discussion of this document and also a discussion of discount rates and credit policies in view of Mr* Platt*s report upon the recent meeting at Philadelphia of the Open Market Investment Committee for the Federal Reserve System*'1



t h ^ u n d e r s e c r e t a r y o f t ie t r e a s u r y

\Ashville, N. C.,

April 17, 1925CONFIDENTIAL 11

'0 DR, MILLER,

Federal Reserve Board:

I attach for your confidential information

copy of a memorandum of this date which I have

ent to the Secretary as to discount rates and

pen market operations#



KBCV a records section

FEB 6 1958

■ 3 3 3 , — '(- ■ /

A ah villo , »• C .,April 17# 19fS.

to rmH i t poaoiblo, X p rtsw t, that tho Fodoro1 HoaorYo Bonk of

I n York 411 on VedBNiiy roeeattond ta laeriM i in it« dii«onnt rtW

froai to S par oatit* F r « tha TTooaury point of t !« v , X think I t

would bo a niotako to oppoao this inoroaoa and that if actually ro-

oonaoadod by tho Ilov York bonk i t would Vo boot for tho Fodoral Rooonro

Board to approv* it* If i t la to bo opprovod, i t ought to bo o?~>rovod

promptly, for othorwiao thoro will hm dongflr of conflioting with tho

Traoanry’a Hoy finonoing, whioh will Koto to bo annotmood ofcoutMoy ?th,

at tho latoot* If aoda now, I do net boliowo that on inoreaoa in tho

Bow York diooount roto will roolly anbarraao the Troaoury, and in tho

long ran i t would^ftalpfttl if i t pot aoao curb on mooolatlon* To

a lor o oxtoafc* ffcrtharsoro, tho poaaibility of on inoronood roto hoa

boan diaeountod, and aoaoy roto a in tho norkot haT«? for aooo tiao boon

ruling at i por oont or obova,~-ooll aonay, for o*amplo, haa boan running

a t about 6 par oont, with ooooaionol juapo to 6 por oont, while time

ttonoy ond ooaosaroial pocpar hawo far aoao wooka boon quotod at from frj to

B§# or oron highor. Thooo aon«y ratoa hovo nlroody had thoir affoot

an tho band norkot, ond praotioally a ll of our aoonritioa aro aolling at

priooo thot would not bo out of lino with a 6 por oont diooount roto*

On tho othor hond, X m not a t a l l a tro th a t on inorooaa in tha

diooount ro to io noooaaory, or an though i t would do no p a rticu la r horn.



Laet week9a Federal 8es©rve etat@m«nt aho*ed « amoh Improved poeition, with eome liquidation of loam and incremeed re term*, and I personally ihink that thire la auSi^to be gained at thla tint by further aalaa af treasury notee *«s certificates by the Federal iseerr® Banka than by ^ tnarcaeae In the discount rata* 1*1 qw idation of the (tovermant imq* ritiee held by the Federal Heeerve Banka aotoally polls in Federal Reserve ftmda trm the market, and this ante very heavily Into the eapply af fund* available fcr speculation an! expansion, efcio* reserve depoeita with the Federal Beeerve Banka account far about eercti or eight tiaea a* ouch credit at the mcriber banka*

I# at 'aa«kfe etafte»ei«t shaved not M m Id at Ion cf notm and e®rti~ float©* by the Federal fteaerre Batata of ■ only | million dollare far tha -waek, and at the am© tSme indicated a d arable inareaae in billa ptiroheaed in the onen market* Thla ia a poor ahoving, and 1 think the Federal leaerr® Board <sm*ld proparly sake the Federal leaerr# Banka do anah better In tha next we«k or ao* It la an old atory for the Federal Baa err# Banks to be worrying about t air diaeoisnt rata at tha same time that they ara thmaee torae making the situation worae through following a misguided open market policy, and 1 for one do sot aea the jiaetlfloatlom for carrying in the portfolios of the Federal ftaaaraa Banka Government ae&iritlae end bill« bought in the open market to an aggregate of oyer 400 milIIon dollara, all purohae#d at rataa bale* the preaent dlaoount rata, at the yery time when the Federal Beeanra Banka profese to be worried about the general situation and are expecting to rale® their



discount rates In order ta control the expansion of or edit and p m r a l inflation* If the bank* really want ta control expaaiion thay will gradually drast in their funds froa the open market aad liquidate thair praaant holdings of bills and s ectir ltles , — which at thsir praaant figure* voq14 support an expanalon of credits at nea&sr benk* naming as high aa $ billlan dollars*

Fron another paint af view, these apea aarkat holdings af tha ' Fad oral laser*a Hanks aparata somatly like gald Imports, and thair / liquidation operates esaatly like gold axparta* The Federal laasrta Banks ara worried -bout #ieir. preaent lsrga gald holding*, which raally da create * situates which encourages inflation and nay prare dengeraue nhsn gold begins to mara flran aa. thair apen narkat policy,haaarer, which has been gelded almost entirely by selfish oonsidorations af aarning enough to pay salaries, expenses m l dividends, has eaaggarated tha situation by over 400 million dollar*, and produaad praatiaally tha sans offa©% aa If additional gald import* In this ettount had coma into tha country* tha gold situation la difficult to control, far ta a lar§» extent ii depend* on outs id® f eaters, bat tha apt* narkat polloy af tha Federal Reserve Benk* la antiraly within tha power af tha Systen to oontrol, and I think the tine haa cane ta oantral it*

After amra than a year** disease lanf and notwithstanding rape*tad resolutions of the Federal Advieary Council and nor a recently of tha Fadsral ie«er*s Board, the apen markat pollay af many af tha Federal Basaraa Bsnks, particularly C leveled, Chicago, Kansas City and Dallas, and to seme anient af all tha benkn, ia at 111 actually determined by



4

1*4

the question of earning enough to meet expenses mod dividends. Opsn ■arket operations «r« handled m If they hud no relation to credit polios and in oonsequence tho discount rate Ism for long periods boon absolutely aeaxiiaglsss# 01®vel»ndt for etxaaplo* has recently b o m baying entirely unjustified quantities of bills in the open aarleet, for tho solo purpose of replacing Govwrm©nfc securities redeemed by tho treasury and restoring its earning assets to a figure deemed sufficient to assuro meeting expenses end dividends* Kansas City is frankly guided by Hie seae policy.

In tho faae of a oredit situation whioh admittedly does 9anse sou oonoorn, thin Is the most selfish sod narrow-minded attitude Imaginable, and 1 know of no way to control It eaoopt for the Federal leserwe Board to take the leadership* the banks themselves ofeght to do it, and have as a mttor of foot muds sane real progress during the year, but always as the result of dir set pressur# fro* the treasury and practically never on their own initiative* The Federal Reserve Board clearly has power, under Station 14 of the Federal loserve Aot, to regulate these open Market purohaees, and whether or not increases in the dieoount rets are reeenneiided and approved 1 think farther aotion sill have to be taken to bring open market operations Into hsraony with the general oradit policy.

" * ”« > s. P. h




held Aprll l OjJL^*

"Mr. Miller moved that the resolution adopted by the Board

on April 7th, with reference to the liquidation of open market in

vestments by the Federal Reserve banks as a precedent to an increase

in rates, be submitted by the Vice Governor to the Open Market

Investment Committee for the Federal Reserve System, at its meeting

to be held in Philadelphia on Friday, April 15th.

Carried.*



FEDERAL RESERVE BjOARD/WASHINGTON /

A D D R ESS O FFIC IA L CORRESPON DENCE TOTH E FED ERA L R E SE R V E BOARD /

X-36S9

/fX'

April 7» 1923

SUBJECT: Policy Governing Open Market Purchases by Federal Reserve Banks and the Administration thereof*&

Dear Sir: | ybrtvi$

This is to adviise you formally of the action of the Federal Sa- serve Board taken at its! meeting of March 22nd, with respect to open market purchases "by Federal Re^ferve Banks , and which was discussed at the recent conference between the federal Reserve Board and the Governors of the Federal Reserve Bankp. >

The Board has |dopt£d following principles with respect to open market investment op^raMons of the Federal Reserve Banks:

(1) That the tiise, manner, character and volume of open market investments purchased by Federal Reserve Banks be governed with primary regard to the accommodation of commerce and business t and to the effect of such purchases or sales on the general credit situation*

(2) That in making the selection of open market purchases, careful regard be always given to the bearing of purchases of United States Government securities, especially the short-dated issues, upon the market for such securities, and that open market purchases be primarily commercial investments, except that Treasury certificates be dealt in, as at present, under so-called "Repurchase H agreement*

In order to provide for the proper administration of the policy defined above, the Board rules that on and after April 1, 1923* the present Committee of Governors on Centralized Execution of Purchases and Sales of Government securities be discontinued, and be superseded by a new committee known as the Open Market Investment Committee for the Federal Reserve System said committee to consist of five representatives from the Federal Reserve Banks and to be under the general supervision of the Federal Reserve Board; and that it be the duty of this committee to devise and recommend plans for the purchase,sale and distribution of the open market purchases of the Federal Reserve Banks in accordance with the above principles and such regulations as may from time to time be laid down by the Federal Reserve Board*



-2- X-3639

In accordance with the informal agreement made at the time of the last Governors1 Conference, the membership of the Open Market Investment Committee for the Federal Reserve System, will be identical with the membership of the old Committee, as follows:

Federal Reserve Bank of Boston Federal Reserve Bank of New York Federal Reserve Bank of Philadelphia Federal Reserve Bank of Cleveland Federal Reserve Bank of Chicago

By order of the Federal Reserve Board*

Wm* W. Hoxton, Secretary*

To Governors of Federal Reserve Banks. Copies to Agents*




Authority &Q / 2 jf S ?

A

TH E UNDERSEC R ETA R Y O F TH E TREASU XW ASHINGTON

RECEIVED, A P R ? 1923

offnmoffMR. A. O. MITjan

‘WC"D°IN1[ECOROS SECTIONFE B 6 1958

, - . / .- /

f/

Dear Dr. Miller;In view of our conversation of this afternoon, I am

transmitting herewith for your confidential information copies

of 11) my latter of March 30, 1923,to Mr. Case, Deputy Governor

of the Federal Reserve Bank of Kew York, offering to buy $10,000,

000 of Treasury notes at the market, (2) Mr. Case’s letter of

April 4, 1923, stating that the Board of Directors of the Federal

Reserve Bank of New York had decided not to accept this offer, and

(3) my letter of April 5, 1923, to Mr. Case commenting on the

hesitancy of some of the Federal Reserve Banks to take a loss on

their holdings of Government securities. This is a matter on which

it may be necessary, it seems to me, for the Federal Reserve Board

to indicate some general policy to the Federal Reserve Banks.

I am also enclosing as of possible interest in this con~

nection a copy of a letter dated April b, 1923, which I received

from Mr. Case advising that the Federal Reserve Bank of Hew York

has increased from 4 to 4'i' per cent its rate on repurchase agree

ments covering United States Government securities, and a copy of

my letter in reply suggesting that it might be advisable for the

Federal Reserve Banks at this time to mark up their buying rate on

acceptances.

Hon. A. 0. Miller, Federal Reserve Board, T/ashington, D. C.5 enclosures.

Very truly yours,

S. P. GILBERT, Jr., Under Secretary.




Authority £ < ? / 2 J 7 S T

f

(COPY)\ /

i m m m . m i x

OF H5W TOKK*

g& W M M l U k - ***** 19e3-

Bear &r. Gilbert*Aa stated In ray telephone conversation with you

yesterday, wo are oiiaaging our rate from 4> to 4$>, effective April 10, 1923, on nil advances to dealers against united States Government securities purohaeed under fifteen day salat ocntraot agreements*

Government securities geus rally are now selling at price* which represent considerably higher yields# (the Treasury notes yielding approximately 4$*,) and in view of this it is felt that the rate ohaxgpd to dealers should he brought up to a point equal to our present rediscount rate*

Very truly yours,

(Signed) J. H. Case,Deputy Governor*

Honor ah la 3. P*. Gilbert, Jr.,Under Secretary of the treasury,Washington, p. 0.


Reproduced from the Unclassified I Declassified Holdings of the National Archives--m, ________ .

DECLASSIFIEDAuthority f &

oojttiaaagm,. ^Prl1 6*

Dear Kr. Case*

I received your le tte r of April 5, 1923, and not* that

effective April 10 f 1923* you are changing your rate fSroia 4 ta 4 t

per oent on a ll adva&oto to dealers against United S ta te s Gwera-

nent securities purchased under fifteen-day sales oontraot a^ree*

g i a l i t

Xt ooours to m In this oonneotion that, In view of th*

upward tendency of sooney rates and the oonoera which the federal 'Re

serve Banks are Reeling about their discount rates. I t would(xiotybe

inappropriate to m rk up the buying rate on aooeptanoes to a higher

figuve, pezbaps aft hi(|i as 4g per oent* I’here aeons lately to hare

been a considerable lncze&se in the purchases of aooeptanoes In the

open nartet, partioularly by federal He serve Banka like Cleveland,

whioh have liquidated considerable holdings of Govenaaent seouritlea.

I believe i t would broaden Hie market for aooeptanoes end a t the sane

tine give the federal He serve Banks a better hold on tfee general

situation if the lr buying rates were advanced to correspond more

oloeely to the prevailing aarket rates for money*

Very truly yours,

J . H. Case* Ksc[*#Aotinb Govenior* 3* ?• GILSU2 , J r . ,^edoral Jtesarve Bank, Under Secretary.Hew York, I . Y .

3XG/AV&Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


d e c l a s s i f i e d "Authority & Q / Z ? S T

j CCFY.

v April 5, 1923.

CONFITOTIAL

Dear Mr. Case:I received your letter of April 4, 1923, and note that after

careful consideration the Federal Reserve Bank of Nbw York has decided

not to take advantage at this time of the Treasury’s offer to take up

$10,000,000 face amount of 4^ per cent Treasury notes of Series

B-1926 at the market price, plus accrued interest. I note that the

Federal Reserve Bank would be willing to sell the notes at the hook

value, but the Treasury would not be able, of course, to purchase them

on this basis in view of the prevailing market prices.

I hope that the Federal Reserve Bank of Hew York, and the other

Federal Reserve Banks, will feel willing to sell from time to time in

the market, at the prevailing market prices, all or substantially all of

their present holdings of Treasury notes. These notes, like Treasury

certificates and Victory notes purchased by the Federal Reserve Banks

for their investment accounts, were bought primarily for the sake of

earnings and incidentally, in some cases, for the purpose of exercising

credit control when circumstances should arise to make it necessary.

The Federal Reserve Banks during 1922 must have taken many profits in

connection with their dealings in Government securities and now that the

market has to some extent turned I feel that the Federal Reserve Banks

should not be too hesitant about selling their notes and certificates

simply because that may involve taking some losses. These transactions



d e c l a s s i f i e dAuthority &Q /Z C7 5 J

- 2-

must be regarded as a whole and unless the Federal Be serve Banks are to

go hack to th e ir old theory of running an investment account in Govern

ment se curi t ie a simply for the purpose of making earnings, i t seems to

me th e y j fcould he w illin g to take lo sse s , i f n ecessary , whenever c i r

cumstances in d icate the sale o f s e c u ritie s s t i l l ca rrie d in th e ir p ort

fo lio s . Any other view w ill ab solu tely freesse up the holdings of

Treasury notes s t i l l in the hands of the Federal Be serve Banks u n til

e ith e r th e ir m aturity or such tine as a r is in g market makes i t possible

to s e ll the notes without re a lis in g a loss*

I hope th at you w ill review the m atter on th is b a s is , and i f

you think i t necessary put i t up to the C entral Committee on Open Maxfcet

Operations fo r fu rth er con sid eration .

Very tru ly yours,

(Signed) S. P. G ilbert, J r .

Under S e cre tary .

J . H. Case, Esq*,c /o Federal* Be serve Bank,15 Hassau S tre e t ,Hew York, N. Y.




(CO FT)

ilEEBAL RESERVE B A M OF HEW YORK

April 4, 1923.

CONFIDENTIAL.

Dear Mr. Gilberts

With farther reference to your letter of March 30, 1923, in which

you state that the Treasury will be willing to talcs up $10,000,000. par

value of 4 ^ Treasury notes due September 15, 1926, held by this bank in

its investment account, at the market plus accrued interest, while, as

stated in our telephone conversation Saturday, m will be glad to sell

these to you at the book value, we do not feel that we are in a position

at present to sell them at the market price.

These notes, you will recall, were acquired by us in connection

with the exchange of Victory notes last August. The latter were purchased

in July 1922 at somewhat above par and if we were to dispose of them at

the market price, which is at pressnt 98i, (representing approximately a

4.75$ yield) the transaction would entail a money loss to us of $191,532*75.

The matter has been taken up with our Board of Directors at its

meeting to*day, and after careful consideration it was decided not to take

advantage of the Treasury* s of for at this time.

Very truly yours,

(Signed) J. H. Case,Deputy Governor.

Honorable S. P. Gilbert, Jr.,Unfer Secretary of the Treasury,Washington, D. C.



I d e c l a s s i f i e dAuthority

COPY

March 30, 1923.

Bear Mr* Case:I understand, that the federal Be serve Bank of Hew

York holds about $10,000,000 face amount of per cent Treasury notes which it would be willing to sell, and I am writing to advise you that the Treasury would, be willing to take up these notes at the Market, plus accrued interest, for retirement out of "proceeds of Treasury note*", provided that the transaction can be put through within the next two or three days, preferably on March 31st* I as sumo you will advise ae promptly whether or not you wish to accept this offer.

Very truly yours,(Signed) 8. P. Gilbert, Jr.,

Under Secretary.

J.H.Caee, Esq., Acting Governor, Federal Reserve Bank, New York, N. Y.



d e c l a s s ifie d

Authority

yr, -


held April 5, 1925.

"The Vice Governor stated that he had received a letter from

Mr. Case, Deputy Governor of the Federal Reserve Bank of New York,

suggesting that the Board call a meeting at Philadelphia on the 15th

of April of the Open Market Investment Committee for the Federal

Reserve System, provided for in the resolutions of the Federal Reserve

Board adopted March 22nd,\ and which it is understood will be composed

of the same members as was the former Committee of Governors on

Centralized Execution of Purchases and Sales of Government Securities.

Upon motion, the Secretary was instructed to wire Governor McDougal, the Chairman of the late Governors1 Conference, with a view to ascertaining who is tbe present Chairman of the Committee aforesaid.

The Vice Governor was authorized, after receipt of this information, to call a meeting of the Committee at Philadelphia on the 15th of April."



d e c l a s s i f i e dAuthority h £ )J 2 jf5 J

I 1

RESOLUTION RECENTLY ADOPT'D BY T!IE TEDERAL RESERVE BOARD.

X - 367&

”7/hereas tha F ed era l R eserve Board, under the powers , given

i t in S e c t io n s 13 and lU o f tha F e d e ra l Reserve A ct , has a u th o r i ty

to l i m i t and otherw ise determine the s e c u r i t i e s and investm ents

purchased by F ed era l re s e rv e banks:

Whereas the F ed era l Reserve Board has never p re s c r ib e d any

l i m i t a t i o n upon open .market purchases by F ed era l re serv e banks;

V/hereas the amount, t im e , c h a r a c t e r , and manner of such pur

chases may e x e r c i s e an important in flu e n c e upon the money market;

Whereas an open market investment p o l i c y f o r the twelve banks

composing the F e d e ra l re s e rv e system is n e c e s sa ry in the i n t e r e s t

o f the maintenance o f a good r e la t io n s h ip between the d iscou nt and

purchase o p eration s o f the F ed era l r e s e rv s banks and the general

money market;

Whereas heavy investm ents in United S ta te s s e c u r i t i e s ,

p a r t i c u l a r l y s h o r t -d a te d c e r t i f i c a t e i s s u e s , have occasioned em

barrassm ent to the T reasu ry in a s c e r t a in in g the true c o n d itio n

o f the money and investm ent markets from time to tim e,

in the e x e r c i s e o f i t s powers under the F e d e ra l Reserve A ct , l a y

down and adopt the fo l lo w in g p r in c ip le s w ith r e s p e c t to o^en

market investm ent op eration s o f the Fed eral re s e r v e ban ks , t o - w i t :

market investm ents purchased by Fed eral re s e rv e banks be governed

THEREFORE, Be I t Resolved, That the Fed era l Reserve Board,

( l ) That the tim e , manner, c h a r a c t e r , and volume of open



d e c l a s s i f i e dAuthority <Z-Q / Z C?5 ' J

- i - x-3675

with, primary regard to tha fitccoinr.od.ation of commerce and

b u s in e s s and to the e f f e c t of such purchases or s a le s on the

genera l c r e d i t s i t u a t i o n .

( 2 ) That in roak- ing the s e l e c t i o n o f open market x ^ c h a se s ,

c a r e fu l regard be always given to the b ea r in g o f purchases of

U nited S ta te s Government s e c u r i t i e s , e s p e c i a l ly the s h o r t -d a te d i s s u e s ,

upon the market f o r such s e c u r i t i e s , and th a t open market purchases be

p r im a r i ly commercial investm ents , except th a t Treasury c e r t i f i c a t e s

be d e a l t in , as a t p r e s e n t , under s o - c a l l e d ‘’re p u rch a se ’1 agreement*

Be I t Fu rther R esolved , That on and a f t e r A p ril 1 , 1923>

p re s e n t Committee o f Governors on C e n tra liz ed Execut io n of Purchases,

and S a le s o f Government S e c u r i t i e s be d isc o n t in u e d , and be superseded

by a new committee known as the Open Market In v e s tment Committee—fo r

the Fed eral R eserve System? sa id Committee to c o n s i s t o f f iv e representa^

t iv e s from the re s e r v e banks and to be under the g en era l s u p e rv is io n

o f the Fed eral R eserve Board; and th a t i t be tha duty of t h i s Committee

to d ev ise and recommend plans fo r the purchase, s a l e and d i s t r i b u t i o n

o f the open market purchases o f the F e d e ra l re s e rv e banks in accordance

w ith the above p r in c ip le s and such r e g u la t io n s as may from time to time

be l a i d down by the F ed era l Reserve B o a rd .”

Note 1 The Board has determined th a t Government s e c u r i t i e s ofs h o r t m a tu r i t ie s should be l iq u id a te d f i r s t , and wisnes the opinion o f th e Conference o f Governors as to how t h i s may b e s t be done without d is tu rb an ce to th e market-



DECLASSIFIEDC

3 C ? j >

GaraedRESOLUTION'S APPROVED BY FEDERAL RESERVE BOARD AT

MEETING ON MARCH 2 2 , 1923:*

/ X - 4 5 8 6

K

’’W h e re a s t h e F e d e r a l R e s e r v e B o a r d , u n d e r t h e p o w e r s g i v e n i t i n S e c t i o n s 1 3 an d 1 4 o f t h e F e d e r a l R e s e r v e A c t , h a s a u t h o r i t y to l i m i t and o t h e r w i s e d e t e r m i n e t h e s e c u r i t i e s an d i n v e s t m e n t s p u r c h a s e d b y F e d e r a l r e s e r v e b a n k s ;

W h e re a s t h e F e d e r a l R e s e r v e B o a r d h a s n e v e r p r e s c r i b e d a n y l i m i t a t i o n upon o pen m a r k e t p u r c h a s e s b y F e d e r a l r e s e r v e b a n k s ;

W h e re a s t h e a m o u n t t i m e , c h a r a c t e r , a n d m anner o f s u c h p u r c h a s e s may e x e r c i s e an i m p o r t a n t i n f l u e n c e upon t h e money m a r k e t ;

W h e re a s an o p en m a r k e t i n v e s t m e n t p o l i c y f o r t h e t w e l v e b a n k s c o m p o s in g t h e F e d e r a l r e s e r v e s y s t e m i s n e c e s s a r y i n t h e i n t e r e s t o f t h e m a i n t e n a n c e o f a g oo d r e l a t i o n s h i p b e tw e e n t h e d i s c o u n t a n d p u r c h a s e o p e r a t i o n s o f t h e F e d e r a l r e s e r v e b a n k s an d t h s g e n e r a l money m a r k e t ;

W h e r e a s h e a v y i n v e s t m e n t s i n U n i t e d S t a t e s s e c u r i t i e s , p a r t i c u l a r l y s h o r t - d a t e d c e r t i f i c a t e i s s u e s , h a v e o c c a s i o n e d e m b a r r a s s m e n t t o t h e T r e a s u r y i n a s c e r t a i n i n g t h e t r u e c o n d i t i o n o f t h e money a n d i n v e s t m en t m a r k e t s f r o m t i m e to t i m e ,

THEREFORE, B e J t R e s o l v e d , T h a t t h e F e d e r a l R e s e r v e B o a r d , i n t h e e x e r c i s e o f i t s p o w e r s u n d e r t h e F e d e r a l R e s e r v e A c t , l a y down an d a d o p t t h e f o l l o w i n g p r i n c i p l e s w i t h r e s p e c t to open m a r k e t i n v e s t m e n t o p e r a t i o n s o f t h e F e d e r a l r e s e r v e b a n k s , t o - w i t ;

( 1 ) T h a t t h e t i m e , m a n n e r , c h a r a c t e r , a n d volum e o f open m a r k e t i n v e s t m e n t s p u r c h a s e d b y F e d e r a l r e s e r v e b a n k s b e g o v e r n e d w i t h p r i m a r y r e g a r d t o t h e a c c o m m o d a t io n o f com m erce an d b u s i n e s s an d t o t h e e f f e c t o f s u c h p u r c h a s e s o r s a l e s on t h e g e n e r a l c r e d i t s i t u a t i o n .

( 2 ) T h a t i n m ak in g t h e s e l e c t i o n o f open m a r k e t p u r c h a s e s , c a r e f u l r e g a r d b e a l w a y s g i v e n t o t h e b e a r i n g o f p u r c h a s e s o f U n i t e d S t a t e s G ov ern m en t s e c u r i t i e s , e s p e c i a l l y t h e s h o r t - d a t e d i s s u e s , upon t h e m a r k e t f o r s u c h s e c u r i t i e s , a n d t h a t o p en m a r k e t p u r c h a s e s b e p r i m a r i l y c o m m e r c i a l i n v e s t m e n t s , e x c e p t t h a t T r e a s u r y c e r t i f i c a t e s b e d e a l t i n , a s a t p r e s e n t , u n d e r s o - c a l l e d " R e p u r c h a s e " a g r e e m e n t .

Be I t F u r t h e r R e s o l v e d , T h a t on a n d a f t e r A p r i l 1 , 1 9 2 3 , t h e p r e s e n t C o m m ittee o f G o v e r n o r s on C e n t r a l i z e d E x e c u t i o n o f P u r c h a s e s an d S a l e s o f G overnm ent S e c u r i t i e s b e d i s c o n t i n u e d , a n d b e s u p e r s e d e d b y a new c o m m i t t e e known a s t h e Open M a rk e t I n v e s t m e n t C o m m ittee f o r t h e F e d e r a l R e s e r v e S y s t e m , s a i d C o m m ittee t o c o n s i s t o f f i v e r e p r e s e n t a t i v e s fBom t h e r e s e r v e b a n k s an d t o b e u n d e r t h e g e n e r a l s u p e r v i s i o n o f t h e F e d e r a l R e s e r v e B o a r d ; a n d t h a t i t b e t h e d u t y o f t h i s C o m m itte e t o d e v i s e an d recom m end p l a n s f o r t h e p u r c h a s e , s a l e a n d d i s t r i b u t i o n o f t h e o p e n m a r k e t p u r c h a s e s o f t h e F e d e r a l r e s e r v e b a n k s i n a c c o r d a n c e w i t h t h e a b o v e p r i n c i p l e s an d s u c h r e g u l a t i o n s a s may f r o m t i m e t o t i m e b e l a i d down b y t h e F e d e r a l R e s e r v e B o a r d . ”



'*■!& -*7 S**bss»

.m.t%*r of tho investment policy of tho JOdoral reserve basics itttitself to atf bvIad, laoro particularly tho

policy* I should state tho question at issue as followsi FEB 6 1958 }w>r‘J! .■*3” r

■4 * - /Federel roaorve basics. In nolling Government securities,

tft tmdortafcins to xmtrol tho z&rieoft by "borrowing" from tho loj(*j+

oar&et. fhoy ooaic to justify this procedure on tho ground that such boirm & g is naoaea&ry, ox* &t least very advisable, under oirtnus* v.aio s ilk, too prosent in order to ooceroles appropr iato control over tae marmot*

Aeoopting as a natter of prlnolplo that it i a propor prooedur© for a federal roserwe book, in certain oirourretsnooe, to undertow tr it? flu-jus#

»

tho course of tho oetrket by b o r r o w f r o m it, and granting that prosent

conditions aro such as to warrant tho application •■..? t'ib principle, it

is ^ot to be noted, if not er^hasiaed, that the mrlcot ■which is 'tho propor

proviso of tho Federal ro^oTTo tem’tc &rxl tho ons naricct which th.%' aro

warranted in nndcrts&inc to cncrcise a control ovor is not tho investment

woflsot., or ovon tho goncrr-l iao»oy rv&r’cc-t, but ths bill and oomnwroial papor ^

markets.

fho sale of Qovernraent oecnriti os, «von tho no of tt\ort dato« has no diroot offoot upon tho bill mar cat. it is at best an indirect motliod of

reachl2? tho bill Tnartot* fflto ^caioral mono/ mricot is affected by tiio sulo

Of Qovamsoxits* m d thoa. by a pxooeds o£ loparoussioa an effect is felt in tho bill m r & » U {Shis a m % m about tlu*o%:h tho diversion of ftesids from the

bill aarfcet to the mcir&et fov Qovomaonte by fodoral reserve batik sal os of the latter* SO bring ^bout tho diversion of funds from ths bill markot to


d e c l a s s i f i e dAuthority & Q /Z 7S ~ f

ia/6/m

th* rnsm*% tor 3ovem»aita ~ In other word** to ml#* the rat* for bills *nd to stiff*a the bill mart** - th* pri** of Owor«n*it* aust b* 4*x>*®83®d soft their yield f&i»*d to * point auff iai*at to ale* the ahift of funds from th* bill frm*i»t *ttJP*oti?*i oth**#!** stated, to fofo* the bill m*u?it*t t* bid a^air»t th* wurtMrt fbr do^0«wi*tit*# Stating the prapasitioa a Uttl* differently, and yxivmnz oro pouito&ly fop rnrposee of th* p#ee«nt di*~ jus* ion, it- agp*or* that the fear Q‘-*reniraanta asiet in «*»* degree be"•polled" in order to aocoespllsh the professed objoat of P*d*ral reeenr*



d e c l a s s ifie d

Authority &Q /Z ?5T

REC’O in RECORDS SECTIONT H E U N D ER SEC R ETA R Y O F TH E TR EA SU R Yp£B 6 1958

W A SH IN G T O NW A SH IN G T O N _

September 19, 1922*PERSONAL AMD CONFIDENTIAL

Dear Dr. Miller:I am attaching for your information and consideration a

copy of a letter dated September 15, 1922, which I have received

from Governor Strong in response to the suggestions made in my

letter of September 13th as to Federal Reserve Bank investments

and discount rates. It is a little early to tell what is going on,

but I am fairly well satisfied that as a result of the September

15th operations there will be a considerable decrease in Federal

Reserve Bank holdings of Government securities. Whether this gain

will be held will depend on whetlarthe banks continue to refrain

from reinvestment. I think it may be advisable in any event to

have Governor Strong come down to Washington some time within the

next week or so to discuss the policy which should be followed,

and I should be interested therefore in any suggestions which you

may be willing to offer, and particularly in knowing what day next

week would be a convenient time for some such conference with

Governor Strong.\

Very truly yo\—

S. P. GILBERT, Jr., Under Secretary.

Hon. A. C. Miller, Federal Reserve Board Washington, D. C.1 enclosure



d e c l a s s i f i e dAuthority / 2 .9 5 7

COPY

FEDERAL RESERVE BANK OF NEW YORK.

PERSONAL ANDCONFIDENTIAL September 15, 1922.

My dear Mr. Gilbert:

Your favor of the 13th instant is before me. We intend to let our ma

turing certificates run off to-day, and the result of a variety of transactions

■will be to reduce our oin holdings somewhere in the neighborhood of $32,000,000.

This morning we have $139,000,000 of Treasury notes and certificates of indebt

edness (some six or seven millions of-which are those carried for dealers) and

the above reduction will bring us down to less than $98,500,000 of our own owner

ship; this compared with $155,000,000 to $156,000,000 on July 1st. Our present

estimate of earnings would indicate that with n x allowance for the'regular charges at the end of the year we will no more than earn our dividend. As to all the

reserve banks, since the comrr.ittee was formed and not including to-day*s trans

actions, the reduction in their investment account has totalled $101,000,000.

The reduction effective to-day has not been reported to us, but will probably be

nor less than |'50,000,000 more, including our own.'

In view of* these facts you will realize that we have witnessed a reduc

tion sin ce_Jujo^^^ ttee began actual operations, that is in three and

one-half months, exceeding $150,000,000 or about one-third of.the-who^asQauftt.

I do not thing that anything more than that could have been done without’ disturb

ing the money market, although we too have suffered impatience at times that we

did not progress faster.

Please do not consider, as might be implied from your letter, that I

personally, $.s chairman of the Committee, or even the committee as a whole attempts

or desires to attempt to exercise any control over investments or investment policy

of the respective reserve banks. We had an understanding, as you know, that



d e c l a s s i f i e dAuthority b Q J J J ? 5 J

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investments in excess of what is needed for earning purposes should be allowed to

run off, and that operations should be conducted through the central committee.

Our influence has been directed towards reducing the account right along, but we

have no power, nor would we desire to exercise the power, to be more than the

agents of the Federal Reserve Banks to carry out their wishes in line with the

policy established at the April conference.

Your suggestion that we liquidate investments faster than we are doing

and at the same time reduce discount rates, I fear is not feasible, and certainly

I would want to discuss it with you and with the Federal Reserve 3oard as well as

our directors very thoroughly before attempting such a program. My impression

is that our next move must be to slightly increase the rate at which we buy

bankers acceptances, which will have a tendency, of course, to distribute these

bills throughout the market, instead of having them accumulate in our hands,

and this, it seems to me, is more in line with the policy which you advocate than

would be a reduction of our discount rate to a point whicrh would invite borrowing

by member banks and which indeed might prove to be inflationary rather than the

reverse. Certainly that tendency might be more likely to develop were we to

establish, say, a 3 l/2 per cent rate and at'the same time to call in a consider

able volume of funds from the market, which would put the general market rates

above what they now are.

Permit me to say personally that I think Mr. Case has accomplished a

wonderful result in what has been above reported, and we expect to continue

quietly along this line, using every effort jbg__axairi any temporary or even more ,

extended disturbance of money rates, and I have felt that we were fully meeting

the views of the Treasury, especially as these matters have been put forth in

such detail almost daily.



d e c l a s s i f i e dAuthority /Z ? £ ~ f

*

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You may be interested in learning of the intention of certain of the

officers of reserve banks to bring out a thorough-going discussion of this ■whole

policy at the conference of governors which is to be held in Washington on the

10th of October.

As to the market generally for the Government issues, while there has

been a slight improvement for the last few days, for at least three or four

weeks past there has been a constant decline and a really soft market. To il

lustrate: the Fourth 4^ per cent Liberty Loan Bonds have declined from high

price I-3; per cent; that is from 101*86 to 100.60. This we attribute to a

variety of causes. One is the adverse exchanges, that is the movement of funds

to the West for crop purposes; another, somewhat more active commercial demands for

funds; and undoubtedly the third is the apprehension that the bonus bill will

i become law and impose considerable borrowings by the Treasury.

We have constant evidence of a tendency on the part of institutions

to liquidate securities which are paying the lowest rate of return, which have

in the main been Treasury notes and Treasury certificates.

We are unable to lay out a definite program, in fact have no authority

to decide how rapidly the Reserve Banks should liquidate their holdings of certi-

ficates and notes, but if you feel willing to take the responsibility of indicat

ing at what rate you yourself would advise liquidatingt upon telephone suggestion

with the figures stated coming from you I could arrange with some of the Reserve

Banks to join us in carrying out such a program# It would hardly be possible to

do that, however, before the Governors* conference, at ..hich time »e hope to

have a statement of earning assets and of respective earnings from all of the



d e c l a s s i f i e dAuthority &Q /2J?5~?

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Reserve Banks as an aid to consideration of this very matter.

Very truly yours,

(Signed) Benj. Strong,tJ • H* Case •

P. S. This letter T?as dictated by Mr. Strong, but in his absence,

signed by Mr. Case.

Honorable S. P. Gilbert,The Under Secretary of the Treasury, Washington, D. C.

BS.RAH


box 1434, folder 4: open market investment committee (sep ... · declassified authority &q /z 7...

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